Credit score up? Now build credit smarts

Well done, America. Credit scores across the nation are going up.

On the other hand, knowledge of how credit works is declining.

Consumers' grasp of credit is the lowest it's been in eight years, according to an annual survey by credit scoring company VantageScore and the Consumer Federation of America, a nonprofit association of consumer groups. For example, 62 percent of those surveyed this year knew that everyone has more than one credit score. In 2012, 78 percent knew that.

More people rated their own knowledge highly despite knowing less. In an era when free credit scores and reports are plentiful, this is perhaps not surprising. The share of respondents who called their credit knowledge "excellent" or "good" was 60 percent in 2019, up from 54 percent in 2012.

Millennials were a little more modest. Only 56 percent of those ages 21 to 38 rated their knowledge as "excellent" or "good," compared to 61 percent of people ages 39-54 and 65 percent of those 55-73.

Why credit scores are going up

The average FICO score last year was 704, according to FICO, continuing a steady rise from a low of 686 in 2009 during the Great Recession. The average VantageScore — FICO's competitor — was 680, continuing to climb but not yet as high as the 685 seen in 2008.

Factors such as a large-scale economic recovery, low unemployment and consumers' confidence in their own finances contributed to higher scores, says Rod Griffin, director of consumer education and awareness at Experian.

Also, millions of people experienced a score bump over the past two years as the three major credit bureaus — Experian, Equifax and TransUnion — stopped including some negative marks on tax liens, civil judgments and some types of collections.

What you don't know can indeed hurt you

The knowledge...