Americans Dont Truly Understand FICO Scores

So you understand what your credit report is? You are fully aware of the term 'credit score'? You may be in the minority as most Americans 'think' they do but do they really? A recent study conducted by Caravan Opinion Research Group for GMAC Mortgage in Horsham, PA brings facts about credit scores to light.

(PRWEB) July 20, 2005 -- You are likely familiar with the term "credit score," but do you truly understand exactly what it is, and just how it can affect your ability to not only get a loan, but the interest rate you'll pay as well as the amount of your monthly payments? Many people know that they have a credit rating, but their knowledge doesnt extend much beyond that.

In fact, a recent study conducted by Caravan Opinion Research Group for GMAC Mortgage in Horsham, PA brings these facts to light. In a telephone survey, participants were asked various questions about their credit scores and how they believe it will affect them financially. Surprisingly, the survey points out that many Americans simply don't understand how the system works. In other words, many of us don't know how to put this valuable tool to work in our lives.

For example, 52% of those surveyed said that if their income were raised, it would automatically increase their credit score, when in reality, income has nothing to do with the score. Let's take a look at how the participants view their credit scores, and talk about why or why not they were correct in their answers.

70% of those surveyed were right about one thing: a FICO score of 800 or more will allow you to get the lowest rate interest loan on a mortgage. The highest possible FICO score is 850, and anyone who achieves 760-850 points on their score is considered low-risk.

85% of those surveyed also said that paying your bills on time is a good way to increase your credit score. In fact, this is one of the best ways to insure that your credit worthiness is up to par.

32% told surveyors that closing out all of their existing credit accounts would likely increase their score, which in fact could be devastating to a persons credit score. Why? Because if those accounts show a good payment history-something crucial to a good score-by closing them, the record of good payments would be completely wiped out.

55% got it right when they said that paying down credit card debt was an optimal way to increase a credit score.

But 31% made a blunder when they said that reducing the credit limit on their credit cards would help their scores. In fact, a person with a high credit limit who only uses a portion of that credit is ranked much higher on their score.

So, how did you measure up on your knowledge of FICO scores? If you have some false assumptions as many Americans do, why not take a moment to brush up on the latest information? The easiest place to do that is by going directly to the source-FICOs own web site. Visit it here (http://www.myfico.com/ ) and find out what you can do to improve your score today.

The source of this release was from www.credit-cards-info.com, where credit card and related news is added daily.

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