GAO: Consumers Need More Education on Credit Reports
 
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GAO: Consumers Need More Education on Credit Reports

San Diego, CA - Consumers understand the basics of credit reporting, but could use more education on what credit scores mean in their lives, according to a survey of 1,578 consumers conducted by the General Accounting Office.

The survey found that about 60% of consumers surveyed had seen their credit reports and most consumers understood what a credit report contained and the sources of this information. However, many consumers did not know more detailed information, such as how long items remained on their credit reports or the impact their credit history could have on insurance rates and potential employment. Many consumers were also not aware that certain behaviors, such as using all their available credit, could negatively affect their scores, the report found.
Similarly, GAO found that most consumers knew they had the right to dispute information on their credit reports, and a small percentage, 18%, had disputed inaccuracies. But most consumers did not fully understand their rights in the dispute process, for example, that there is no cost to dispute inaccurate information or that they could contact the Federal Trade Commission if they could not resolve a dispute with the CRAs.

Less educated, lower-income individuals and people with less experience obtaining credit were associated with lower survey scores, while having certain types of credit experiences, such as an automobile loan or a mortgage, were associated with higher scores, according to the GAO.

The report says that educational efforts could potentially increase consumers' understanding of the credit reporting process and the efforts should target those areas in which consumers' knowledge was weakest and those subpopulations that did not score as well on this survey, the GAO says. Also, the office recommends that the Chairman of the Federal Trade Commission take steps to improve consumers' understanding of how credit reports and scores are used, their right to dispute inaccurate information, and how consumers' credit behavior could affect their credit history.

Norm Magnuson, spokesman for the Consumer Data Industry Association, the organization that represents the consumer credit reporting industry, says that much progress has been made in the last several years to educate consumers on credit reports and to make credit reports more accessible and understandable for consumers. For one thing, he says, most credit reports are now issued in an narrative format which provides explanations on what scores mean and how they can be improved.

Just in the last year alone, significant progress has been made in providing an incentive for consumers to access their own reports with the passing of the Fair and Accurate Credit Transactions Act, which mandates that consumers are provided with access to their credit report annually for free. "Offering a free report is a major piece of financial literacy. The barrier no longer exists to that information," Magnuson says. 
 

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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