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Report Says Consumers Need To Better Understand Their Credit Scores

Americans can save billions of dollars annually on credit card and other interest payments by raising their credit scores, but many consumers still don’t know enough about the complex numerical values that represent their credit risk.
According to the consumer group Consumer Federation Of America, public awareness of credit scores has improved but is still poor.

Credit CardAlthough awareness of credit scores has increased in the past year, it remains poor, the Consumer Federation of America and Seattle-based bank Washington Mutual Inc. found in an annual survey released Thursday.

Given the participation of Washington Mutual, also knowns as WaMu, you would think they really care about the consumer and want to save you money.

One of my favorite bloggers, Karen George, has a different take on WaMu. If you are considering doing business with them, I would read her articles Once Again, WaMu Screws Me and Preditory Banking On A Smaller Friendlier Scale  

To learn more about exactly what a credit score is, refer to my article “What Is A FICO Score “.

FICO scores are used by banks and insurance companies to determine rates for mortgage loans, credit cards, auto loans and other financing. Utilities, landlords and employers also check credit scores. Lower credit scores can cost you in many ways.

To learn more about how you can increase your overall wealth by improving your credit score, check out Your Credit Score – The Key To Building Your Future Wealth .  

One way to raise a credit score is to avoid charging above the maximum limit on a credit card, or coming close to the limit, the study said.

However, many credit card issuers have recently cut limits on many cards to reduce their credit risks. These reductions can hurt credit scores because they are based partly on the amount a consumer has on a card compared to its overall limit.

For example, if you have charged $4,000 on a card with a $10,000 limit, the “utilization rate” is 40 percent. But if a card issuer reduces the limit to $5,000, that bumps your utilization rate up to 80 percent. Bad for you, but good for them. Isn’t that just business in America these days.

The Consumer Federation recommends credit card users keep the utilization rates below 50 percent, said Stephen Brobeck, executive director of the group.

To improve their credit scores, consumers should also avoid opening multiple new accounts quickly, and pay off debt rather than moving it around, the study said.

Look for upcoming articles on Pensacola Real Estate News regarding ways to improve your credit scores.

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  1. Steve

    Great post about credit scoring. I wrote a series of posts on my site about ways to improve your score at:

    http://steverussellonline.com/blog/2008/08/5-ways-to-improve-your-credit-score-lesson-1/

    Credit scoring has always been important, but as we get into an increasingly restrictive lending environment, it is more important than ever.

  2. Kevin Sandridge

    Great job on this article, Karl. These tips are useful to anyone trying to increase or maintain their credit score!

    Listen, wanted to give you a heads up. Cyndee Haydon clued me into your blog – and I really enjoy it! So…

    I just wrote a blog post listing your blog as one of several Florida-based sites folks should check up on regularly.

    Thanks for all the great information you are putting out there. I’d appreciate any feedback you might have in terms of other Florida real estate-oriented blogs I might have missed!

    Regards,

    Kevin Sandridge
    Winter Haven, FL

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