It’s Financial Literacy Month, and U.S. consumers still need to bone up on general financial knowledge.
Over half of respondents to a new U.S. News survey — about 53% — don’t know FICO scores are the scores lenders look at to determine your creditworthiness. In fact, about 44% confuse FICO with one of the credit-reporting bureaus.
U.S. News surveyed 1,200 consumers in April, asking them about their spending habits and general financial knowledge.
The results aren’t as surprising as you might think, since according to the World Economic Forum, half of U.S. adults lack financial literacy. And many responses follow a similar theme.
[Read: Best Credit Cards.]
‘Young and Dumb’
Most respondents got their first credit card after the age of 18, with about 50% getting their credit card in college or after high school and another 25% getting their first credit card after college.
Only a combined 25% were able to get a leg up with the help of a parent or guardian and were added as an authorized user before they applied for their first credit card.
What’s more, 39% of respondents maxed out that first credit card. Reasons varied, but a consensus was essentially, “I was young and dumb.” Here’s why respondents said they maxed out their first credit card:
Pop Quiz
When asked what happens to credit reports and credit scores when two people get married, a combined 48% failed to get the answer, either saying the reports combined into one as they are assigned to each household (22%) or they don’t know (26%).
Over half of respondents carry a balance month to month (57%), and 53% incorrectly say doing so boosts your credit score. Quick reminder: Keeping an ongoing balance on your credit card does not improve your credit score. In fact, it can actually hurt it.
[READ: Best Credit Cards for Students]
What’s more, the only age group that correctly said carrying a balance could actually lower your score was the 55-and-over group. Every other age group leaned toward the notion that carrying a balance helped your score.
Respondents were asked what the difference is between credit scores and credit reports. While 46% choose the correct answer, a combined 54% choose incorrectly or say they don’t know.
Unfortunately, the lack of financial literacy can be cyclical if the blind lead the blind. Almost 45% of respondents say they sought out financial advice from friends and family, with only 25% going to online publications for advice (hello there). What’s more, 32% don’t seek out financial advice at all.
Spending Habits
When it comes to tracking spending, the majority of respondents rely on budgeting apps (37%). But what’s interesting is that the older a consumer gets, the less they track their spending.
Overall, 29% of respondents acknowledge not tracking their spending. When divvied up by age group, the percentages only go up:
— I don’t track my spending: 29%
— 18-24 years old: 16%
— 25-34 years old: 18%
— 35-44 years old: 24%
— 45-54 years old: 30%
— 55 and over: 39%
When asked how much they have in emergency savings, the largest group of consumers have less than $1,000, which is pretty par for the course since a recent U.S. News survey found that two in five Americans don’t have an emergency savings fund at all.
Here’s a breakdown of much consumers have in emergency savings:
— Under $1,000: 37%
— $1,000-$5,000: 27%
— $5.001-$10,000: 13%
— Over $10,000: 23%
[Read: Best Credit Cards for Good Credit.]
Concerning credit mistakes they’ve made, consumers were surprisingly optimistic, with 19% saying they haven’t made any credit mistakes. Here’s a breakdown of what consumers say the single biggest credit mistake they’ve made was:
— Carrying too high of a balance: 22%
— Paying the bill late: 22%
— Only making the minimum payment: 15%
— Using too many credit cards: 13%
— Closing old credit cards: 5%
— Not checking my credit report: 5%
They say money can’t buy happiness, but we all know it can buy peace of mind. Financial literacy is important and a necessity considering how money is so deeply entrenched in our lives. By increasing your financial knowledge, you’ll only increase your financial well-being.
More from U.S. News
Your Guide to the Big 3 Credit Bureaus
Carry a Credit Card Balance vs. Pay in Full: What’s Better for Your Credit?
Survey: 42% of Americans Don’t Have an Emergency Fund
Survey: 53% of Consumers Don’t Know What a FICO Score Is originally appeared on usnews.com
