Catastrophe with Credit Cards? More than 40% of College Students Unaware of Their Credit Scores

Millions of American college students appear to be more familiar with their ACT and SAT scores than their credit scores, which could jeopardize their ability to get credit cards and loans.

A recent survey by Equifax, one of the three major credit-reporting bureaus, of college-aged Americans — 18- to 24-year-olds — found that just 43 percent of them had checked their credit scores. Another recent survey, this one by Equifax competitor Experian, showed that just 47 percent of 2016 college graduates knew their credit scores.

Costly Lack of Knowledge

This could be a costly lack of knowledge on the part of college students. For instance, according to the VantageScore credit-scoring system, having a low credit score compared with a high credit score typically bumps up the cost of a $20,000, 60-month car loan by more than $5,000.

Under VantageScore and another major credit-scoring system, FICO, a credit score generally ranges from 300 to 850, with 300 being the worst and 850 being the best. Most credit scores fall between 600 and 750, Experian says, and a score above 700 typically is considered good.

"Because students aren't receiving credit and debt management education in college, they need to be proactive in educating themselves regarding the basics of credit and how it can impact future life goals," says Rod Griffin, director of public education at Experian.

ABCs of Credit Scores

Your credit score normally is pulled to help decide whether you'll qualify for credit cards or loans, and what your interest rate will be, VantageScore says. Furthermore, cable TV providers and electric utilities may use a credit score to determine your initial deposit, and home insurers, cellphone providers, and landlords may take them into account as well, according to VantageScore.

"While the credit-scoring industry is always innovating and changing, practicing good credit behaviors and understanding the basics about your credit score are fundamentally important," says Barrett Burns, president and CEO of VantageScore.

Credit Report Card

Heather Battison, vice president of TransUnion, another one of the three credit-reporting bureaus in the U.S., recommends checking your credit report from all three bureaus every six to 12 months so you can make sure the data about you in each report is correct. Your credit score is based on the information in your credit report, according to the Consumer Finance Protection Bureau.

Under federal law, a U.S. consumer can obtain a free credit report once a year through AnnualCreditReport.com. Meanwhile, a number of financial services providers, including credit card issuers and online platforms such as LendingTree, give free credit scores to consumers.

Jeff Richardson, vice president of marketing and communications at VantageScore, says college students should aim for a solid credit score but shouldn't obsess if a score isn't above 740.

"Building and sustaining a great credit score takes time and a history of making on-time payments across numerous credit accounts," Richardson says. "Simply taking out loans to improve one's credit score isn't good credit management, especially for someone without a steady income. Only take out credit when you need it."

Generation Gap

Results of a nationwide survey commissioned earlier this year by VantageScore and the nonprofit Consumer Federation of America found that 18- to 34-year-olds — a group that includes college students — know less about credit scores than 35- to 51-year-olds do. When quizzed about nine key questions regarding credit scores, the older group performed better on eight of the questions than the younger group did.

Why the gap between the two generations? VantageScore and the Consumer Federation of America suggest that part of the reason is fewer people in the 18- to 34-year-old group said they had obtained their credit scores or credit reports than those in the 35- to 51-year-old group.

Take the Test

Want to find out how you stack up against others when it comes to your knowledge of credit scores? At VantageScore's CreditQuizScore.org website, you can test how much you know about credit scores.

"We encourage consumers, educators and anyone counseling others about borrowing money to take our online quiz and become empowered to make the right decisions to reach and maintain excellent creditworthiness," says Burns, the VantageScore president and CEO.

Get loan offers customized for you today.