According to a recent report, consumers are still under-educated about credit scores, and many may be falling for popular myths when trying to improve their financial standing.
The Consumer Federation of America (CFA) recently surveyed over 1,000 American consumers and discovered that most of them arent aware that a bad score can actually cost them more money. For instance, those with bad scores typically pay more over the life of a 60-month car loan than those with good scores.
They did not understand the financial cost of a low score, said Stephen Brobeck, executive director of the CFA.
This isnt a good sign, given that credit scores reached all-time lows following the Great Recession. Last year, FICO estimated that nearly 43.4 million people had unfavorable credit scores, which FICO defined as scores below 600.
Even if they have bad credit scores, consumers can still avoid overpaying on lines of credit. A recent Merced Sun-Star report urged consumers to shop around for the best car loan available.
The biggest myth is if you comparison-shop, it will destroy your credit scores. It will not, Brobeck said.
Furthermore, a number of consumers think that using 50 percent or less of their total credit limit is a safe level of utilization.