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People Who Frequently Check Their Credit Score Confuse Credit Basics

A majority of consumers are confused about basic credit score components, even if they regularly check their score. The findings from the second annual TransUnion (NYSE:TRU) survey found that more than half of consumers who checked their score in the past 30 days falsely identified salary (58 percent), employment history (56 percent), and age (52 percent) as factors included in a credit score.

Those who regularly checked their credit also inaccurately believed that salary raises (54 percent) or adding to their personal savings (33 percent) is reflected in their scores. Neither of these financial measures is reported to credit bureaus.

Consumer misconception about what factors comprise a credit score has increased slightly over the past year. In 2015, only 47 percent of consumers who regularly checked their credit score believed a higher salary would equate to a healthier credit score, which increased seven percentage points to 54 percent in 2016.

John Danaher, president of TransUnion Consumer Interactive
“Checking your credit score is an important component of financial responsibility, but consumers should do more. Our survey shows that even those who monitor their credit are only skimming the surface of their credit report and often don’t understand the factors that comprise their credit score.” 
John Danaher, president of TransUnion Consumer Interactive

The survey also identified generational divides in credit knowledge, particularly about the difference between hard and soft credit inquiries. While 70 percent of millennials (ages 18-34) checked their credit report in the past year, 30 percent inaccurately said it had a negative effect on their score. In contrast, only 21 percent of Gen X respondents and 15 percent of baby boomers hold this false notion.

TransUnion is committed to demystifying credit scores for consumers and is helping debunk the following myths:

Myth #1: I only need to check my credit score, not my full report, to understand my financial health.

Fact: Your score is an important indicator of financial health, but it is not sufficient. Checking the number alone is equivalent to receiving a grade from a single class and not the full report card. Your credit report provides comprehensive information to help you understand how credit works and what behaviors affect your score. Better understanding of your credit allows you to take specific, active steps toward greater financial health.

Myth #2: It’s ok if I pay my credit card bill late, as long as I pay it eventually.

Fact: A key component of a credit score is your payment history. Paying bills on time and in full each month will have a positive impact on your score. Late bill payments can stay on your report for up to seven years.

Myth #3: Checking my own credit report will lower my credit score.

Fact: Checking your own score is a “soft inquiry” that will not change your score. However, when a lender or creditor pulls your credit it’s considered a “hard inquiry” and may slightly lower your score.

Myth #4: My credit score reflects my salary level.

Fact: Salary is not a direct contributor of your credit score but it’s important to remember that some lenders will evaluate your salary before issuing a loan. Regardless of your salary level, it’s important to use credit responsibility and pay all bills in full and on time.

Myth #5: I can use a debit card to build credit.

Fact: While a debit card can be a helpful tool to ensure you only spend within your financial means, it doesn’t demonstrate to lenders you can handle credit, and therefore doesn’t count towards your credit score.

For more information, visit TransUnion’s website.

About the Survey

The online survey includes responses from 1,615 U.S. consumers age 18 and older. The survey was conducted between June 21, 2016 and June 26, 2016.

About TransUnion (NYSE:TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.

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