In light of the recession, many families have made it a priority to pay down their debt, decrease their spending and bump up their savings. However, many parents have no idea how their actions impact their credit scores. Harris Poll recently conducted a study that shows only five percent of parents out of 1,000 surveyed were able to determine the factors that impact a consumer’s credit score.
Additionally, many parents have a misunderstanding about what types of actions are reported to their credit reports. For example, 56 percent of parents said they believe bouncing a check will negatively impact their credit score. In reality, bouncing checks and being charged overdraft fees will not affect a consumer’s credit score unless the bounced check is not covered and it’s reported as a collection on their credit reports.
While many of the parents surveyed knew the primary factors that would hurt their scores, such as late or missed payments, they were unaware of the lesser-known factors. Of the parents surveyed, 85 percent knew that missing a bill would lower their scores, but only 18 percent understood that reducing their credit limit could have a negative impact.
High school students did not fare much better in their credit score knowledge, as evidenced by a Jump$tart Coalition for Personal Financial Literacy survey. Data shows less than half of high school students were able to identify the three national credit bureaus, and many did not know their rights regarding their credit reports.
Separate reports show financial literacy begins in the home, and the majority of adults who develop wise money management skills were taught financial tactics at a young age. However, many colleges and universities are establishing money management and credit literacy courses for incoming students to help them understand the money basics and avoid debt in the future.
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