New USN Survey Highlights Why Many People Are Stuck with Poor CreditSubmitted by Fides Wealth Strategies Group on October 30th, 2017
Only a very small percentage of Americans have exceptional credit as reflected in a credit score of 800 or greater. The large majority of U.S. consumer have a FICO credit score in the 600s or 700s, but a significant number have “very poor” credit scores below 580. Gaining access to a credit card can be difficult for those with very poor credit scores. A low credit score today can even make it hard to find a job or qualify to rent an apartment or home to live in.
U.S. News conducted a national survey earlier this year involving 1,500 consumers who self-reported credit scores below 640. The survey asked questions relating to how credit card holders used their cards and what steps they are taking to improve their credit.
Over Two-Thirds of Those with Poor Credit Trying to Improve Score
One key result in the 2017 USN survey of lower credit score individuals is that more than two-thirds (68 percent) report that they are working to improve their credit score. The downside here is that almost one-third (32 percent) of Americans with low credit scores are not even trying to improve, so they will be stuck paying high interest rates and have difficulty finding jobs and housing indefinitely.
35 Percent of Survey Respondents Did No Research Before Applying for a Credit Card
Also of note, over half of the respondents said that they have relied on their credit card to pay for basic necessities over the last 12 months. Despite this less than ideal financial situation, 35 percent of respondents replied that they did not do any research before they applied for a credit card.
The good news is that among those making an effort to improve their credit score, almost half (46 percent) are trying to pay off their current balances, and nearly one-third (32 percent) are reducing their spending.
People with Poor Credit Do Not Check Their Credit Report Frequently Enough
According to the survey data, not even a quarter (24 percent) of individuals with bad credit check their credit report at least monthly (as recommended by personal finance experts)
John Ulzheimer, a consultant on consumer credit who had management positions with both FICO and Equifax, highlights that while used to be expensive to check your credit report every month, it is free today and checking it should be a regular habit for those who are trying to beef up their credit score. Ulzheimer suggests not focusing too much on just your credit score. He notes: "One of the ways to make it really simple is to stop focusing so much on the numbers and really focus more on the credit reports because everything flows from that information."
Finally, although most respondents claimed to be making an effort to repair their credit, according to the USN survey, many people are not making much progress toward that goal.
The survey data shows that just over a third (34 percent) of respondents have made an improvement in their credit score over the last 12 months. However, the bad news is that almost 40 percent of respondents have not managed to improve their credit score over the last year, and 27 percent do not track their credit score closely enough to know if it has changed.
Having poor credit is a big deal in today’s networked world. A low credit score means high interest rates if you can get a loan at all, higher auto and home insurance rates, and bad credit can also make it difficult to find a job or even a place to live.
That said, poor credit can be repaired over time, and your sub-600 credit score does not have to remain an anchor constantly sinking your financial future. Take the time to carefully read your credit report to make sure it is accurate, and make sure to follow up and correct any issues you identify. Also make sure to make at least the minimum payment on all your loans every month, try to make larger payments on higher interest loans, and avoid late payments if at all possible.
This article was prepared by a third party for information purposes only. It is not intended to provide specific advice or recommendations for any individual.