By: Daryl Tolliver
Access to credit has been a big topic in recent years, namely as lenders became more selective about whom to extend mortgages, credit cards and loans following the recession. As consumers seek to improve all elements of their finances, many are saying that they lack a strong understanding of how credit works or impacts their loan eligibility and interest rates. However, many expressed interest in learning, and say they are taking active strides to educate themselves.
This data comes from a recent Freecreditscore.comsurvey, which found that 83 percent ofrespondents said they have checked their credit scores recently. Despite this high number, 42 percent of respondents who checked their score said they want to improve it, but don't know the steps to take to do so. Another 28 percent said they have never checked their credit scores and do not see a reason for doing so. Some are trying to take a more measured approach toward using their cards, and are determining how each purchase with credit will impact their scores. For example, 65 percent of respondents said that they consider their credit score when engaging in credit-related activities such as maxing out a card, applying for a new card or skipping a payment.
When broken down by gender, it appears that women are more likely to take ownership of their spending and try to understand how each decision impacts their financial profile. For example, 68 percent of women are more likely to weigh the implications of paying with a credit card, compared with 61 percent of men.
"The survey is an eye-opener to the fact that many people think about credit on a regular basis but don't feel empowered to take control of their credit scores," said Ken Chaplin , senior vice president of marketing for freecreditscore.com.
Helping customers understand their credit decisions
Financial institutions are in a prime position to help their customers not only better understand how credit works, but also the smart money management behaviors that can improve their financial standing. Many community bank and credit union programs provide online resources to help members better understand their accounts. Adopting the same level of care regarding credit accounts not only makes for a more informed customer, but may also curb the types of harmful behaviors that can lead to delinquency and default.
Simple actions, such as creating web pages, providing pamphlets and hosting seminars and webinars can make a large difference in customers' financial and credit literacy.