Credit education is a key component to making smart money decisions. But many consumers aren’t getting the financial education that will put them on the path to financial wellness. Think of it this way—it’s much easier to win a game when you know the rules you’re playing by.
The Credit Education Gap
In a recent Credit Sesame survey of 5,000 Americans, 39% of those surveyed revealed that they were never taught how to manage credit. And if credit knowledge was a class in school, 17% would give themselves a failing grade. The impact of the credit education gap is significant. Of those with poor credit (scores between 300-549), 61% say they were never taught how to manage credit. Compare that with the 24% of Americans surveyed with excellent credit (scores between 720-850) who also say they never received a proper credit education.
According to the survey, only one in four (27%) Americans say they are happy with their credit score. Sixteen percent of Americans with poor credit say they don’t know what steps to take to improve their credit score. What’s more, one in five Americans say they aren’t doing anything to try to improve their credit. Why? They’re convinced it’s a lost cause.
First Impressions are Lasting
Just like when you meet someone new, your first experience with credit can have a lasting impact. Only 9% of Americans say their first introduction to credit was learning about it in school, and 17% say their first experience was learning about credit from their parents.
For a quarter of Americans (26%), their first experience with credit was getting approved for a credit card, which probably felt great. But for those who didn’t receive any credit education and unknowingly spent up a balance they couldn’t pay off, that impression might have turned sour. Seven percent say that initial good impression quickly tanked when they first experienced a late or unpaid bill end up in collections.
One survey respondent put it bluntly: “When I went to college they basically threw me a credit card and I didn’t know how to do it or what it was really all about. So I maxed them out and then was given more to spend and maxed that out and then screwed myself over.”
Knowledge is Power
Americans’ feelings and experiences around credit seem to be tied closely with their credit score. The better their score, the more likely they are to have had a good experience with credit and to view credit in a positive light.
Not surprisingly, Americans with excellent credit tend to associate positive feelings with their credit score: 48% say their score makes them feel proud, 45% say it makes them feel happy, and 32% say they feel empowered. For those with poor credit, it’s the reverse and worse: their scores make them feel worried (49%), ashamed (46%), angry (30%) and confused (16%). The vast majority (87%) of Americans with excellent credit say their experience with credit has been positive, and 61% of those with poor credit say their experience with credit has been negative.
Closing the credit gap starts with financial education. That’s why we’re committed to developing and providing tools that educate and empower Americans to achieve their financial goals. Here are a few quick tips to help boost your credit score:
- Strive to make at least minimum payments on your bills: Missing a payment can have a significant negative impact, especially if you have a short credit history.
- Keep your credit usage as low as possible: Your credit usage, also known as your debt-to-credit ratio, compares the total amount you owe on all your credit cards with the total amount of credit you have available. Try to keep your credit usage at or below 30% of your total credit limit each month—the lower the better.
- Don’t close an account once you’ve paid it off: The age of your credit also impacts your score. Keeping older accounts open—even if you rarely use them—can increase your average credit age.
- Monitor your credit report and dispute any errors: Check your credit report at least annually, and if you see an error, dispute it as soon as possible. Otherwise, the error could negatively impact your credit score.
- Get personalized recommendations and rewards with Credit Sesame: Sign up for free at CreditSesame.com and we’ll arm you with information and personalized recommendations that can help you work toward improving your credit score. And with our online bank account, Sesame Cash, you could earn up to $100 just for improving your credit score.*
*This is a limited time offer. To be eligible for cash rewards, a deposit of $25.00, every 30 days, must be made into your Sesame Cash account. Rewards earnings are available for credit score improvements of ten points or more within a 30-day reward cycle. Improvements are calculated from your baseline credit score, as determined by Credit Sesame. Please review the full program terms for more details.
Survey Methodology: Credit Sesame conducted this research using an online survey prepared by Method Research and distributed by Dynata among n=5,000 adults in the United States. The sample was balanced by census targets for age, gender and ethnicity to be nationally representative of the US population. Data was collected from October 16 to October 30, 2020.