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Credit Score is in the Eye of the Beholder

Many Americans’ perception of their credit scores tend to not be the reality, a recent survey by CardRatings.com suggests. Differences in age, gender, and other factors affect how consumers view their credit score, and the differences are occasionally drastic.

Men, are more likely than women to believe they have a good credit score, a difference of 58 percent versus 45 percent.  The reality is, according to CardRatings and Experian, women tend to have slightly higher credit scores. According to the study, women have less missed mortgage payments than men, a difference of 8.1 percent, and 3.7 percent less average debt.

Between generations, millennials (aged 18-34) are much more likely to believe that they have little credit, bad credit, or no credit. 14 percent of millennials have little faith in their credit, compared to 2 percent of those aged 35 and up. This is caused mainly by student debt, which averages in at $37, 172 according to CardRatings and Student Loan Hero. The crippling debt experienced across the board by recent college grads largely shapes millennials perception of their credit.

Older people are, however, the more likely they are to believe they have excellent credit. 73 percent of those aged 65 and older describe their credit score as excellent. CardRatings attributes this to experience. Older people are most likely to have learned from their financial mistakes.

People without children under 18 are more likely to believe they have an excellent credit score than those with children under 18. Like millennial college grads with debt, those with children tend to have additional financial burden.

Alternative sources of financial information may help those such as millennials gain a credit history.  The Consumer Financial Protection Bureau (CFPB) launched an effort on the premise that access to these documents could help millions of Americans considered invisible to credit agencies, or lacking in established credit histories. Alternative data such as cell phone bills and rent may be accessed by credit agencies to gain information.

“Alternative data from unconventional sources may help consumers who are stuck outside the system build a credit history to access mainstream credit sources,” CFPB Director Richard Cordray said in a statement.

“We want to learn more about whether this non-traditional approach can offer opportunities to millions of Americans who are credit invisible and how to minimize any risks in how this information is used,” Cordray added.

           

           

           

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