According to the March Financial Literacy Opinion Index hosted on the homepage of the NFCC website, www.NFCC.org, a strong majority of consumers, 56%, selected “improving my credit score” as the personal finance area in which they needed the most help.
What consumers continually fail to understand is that the credit score is based on information contained in the credit report. The process of improving the credit score starts with obtaining the credit report, fully understanding the contents, and acting upon that information. Nonetheless, only 5% of respondents indicated they needed help understanding their credit report.
Supporting the findings of the monthly survey is the data from the NFCC’s recent annual Financial Literacy Survey which found that the majority of adults have neither ordered their credit report or score in the past 12 months. In spite of it being free and critical to a person’s financial well-being, Americans remain resistant to ordering their report.
Looking at other areas of the poll, 23% admitted they need help “controlling their spending,” but only 11% of those weighing in selected “knowing how to save money” as their main concern. Uncontrolled spending coupled with inadequate savings is a recipe for financial disaster, while striking a balance between the two leads to a healthy financial future.
Only 5% indicated they needed assistance planning for retirement. This result could suggest that consumers feel adequately prepared to make sound decisions related to retirement. However, retirement planning often takes a back seat to other seemingly more pressing financial concerns, putting many into a position of having to play catch-up as they approach retirement age.
Below are tips for consumers related to each personal finance need listed in the poll:
- Improving a credit score – Understand that there is not just one score. In addition to the widely-known scores, lenders may have scoring models specific to their needs. Fair Isaac, inventor of the popular credit scoring model known as FICO, offers a score on their website, www.MyFICO.com. Scores can also be obtained from each of the three major credit reporting bureaus, www.Experian.com, www.Equifax.com, and www.TransUnion.com. Each score will likely come with features such as an explanation of the score, how your score compares to others, and concrete tips on how to improve the score.
- Taking control of spending – Symptoms of a serious spending problem are hiding purchases, going on a spending spree only to return what was bought, or buying items that are kept, but never worn or used. Once people become aware of their over-spending and its detrimental impact on their life, the next step is to determine the root cause of the habit. Consider enlisting a trusted friend or family member to act as an accountability partner. Changing behavior is never easy, but having someone keeping you on track could provide the discipline necessary to embrace the new lifestyle.
- Knowing how to save money – A person cannot know where he or she is going until they know where they are. Plug the leaks by having everyone in the family who spends money track their spending for 30 days. At the end of that time, hold a family council and review the findings. The goal is to identify areas that can be reasonably trimmed back. Try to carve $10 out of each spending category. With a little effort, this could net an extra $100 per month, enough to begin a rainy day savings account. Try to maintain one month’s salary in the emergency fund, as this amount should sustain you through most unplanned events.
- Planning for retirement – The Human Resource department at work is a good place to learn more about your company’s retirement plan and how to maximize it to your advantage. Money’s best friend is time, so the sooner contributions begin, the longer you’ll have to grow your money. The Social Security Administration offers a helpful Retirement Estimator at www.ssa.gov that projects the benefits a person can expect upon retirement.
- Understanding a credit report – Consumers can obtain their credit report free of charge once every 12 months from www.annualcreditreport.com, or from one of the three credit reporting agencies, although there may be a small fee associated with purchasing from a bureau. Consumers should review their credit report at least once each year, checking it for accuracy and for signs of identity theft. Since the credit report is the basis for many lending decisions, it is critical that consumers not only obtain their report, but understand the contents. NFCC Member Agency counselors are trained to help consumers understand their credit report.
If you need help polishing your personal finance skills, reach out to a trained and certified counselor at an NFCC Member Agency. To locate the agency closest to you, call (800) 388-2227, or go online to www.NFCC.org. For assistance in Spanish, dial (800) 682-9832.
The actual survey question and responses were as follows:
Regarding personal finance, I could use the most help in the area of
Knowing how to save money = 11%
Improving my credit score = 56%
Taking control of my spending = 23%
Planning for retirement = 5%
Understanding my credit report = 5%
Note: The NFCC’s March Financial Literacy Opinion Index was conducted via the homepage of the NFCC website (www.DebtAdvice.org) from March 1 – 31, 2012 and was answered by 1,164 individuals.
Gail Cunningham is Vice President of Membership & Public Relations with the NFCC.
Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.