SENIORS WHO DON’T PAY ATTENTION
TO THEIR CREDIT REPORTS MAY BE AT RISK
Pilot study finds a risk of errors with significant impact in credit reports of seniors.
For Immediate Release – DENVER, May 29, 2012
Contact: Natalie Judd, 203-389-5223, Natalie@bigvoicecomm.com
DENVER, May 29, 2012 – An article recently published in the latest issue of the CSA Journal highlights that, contrary to conventional wisdom, seniors have more debt now than in previous years and a poorer understanding of their financial standing compared to other age groups. This can lead to a precarious situation for people in later life. In a pilot study, researchers at the University of Missouri–St. Louis, the University of Arizona and Fair Isaac Corporation, with funding from the Federal Trade Commission (FTC), sampled 134 individuals from U.S. households ranging in age from under 30 to over 60 years and reviewed their credit reports.
An important and troubling finding of the pilot study was that a significant number of consumers, 33 percent overall and 36 percent of those over age 60, alleged that there was some kind of error in at least one of their credit reports from the three major credit bureaus. In 25 percent of those cases, 17 percent for those over 60, the alleged errors would have had a significant impact on one or more of the consumers’ credit scores.
Although material errors, those with at least a 10-point change, might not occur as often in the senior age group, they do exist and the impact could be severe in the case of those who may need to borrow to cover an emergency financial need. Even a 10-point change in one’s credit score can shift the consumer into a higher risk category, which can significantly increase the cost of borrowing or, at worst, result in denial of credit.
With the successful completion of the pilot study, and as part of its mandate from Congress in the FACT Act of 2003, the FTC has commissioned the same research team to conduct the study on a national scale using the same research methodology. The purpose is to determine the frequency of credit reporting errors for a nationally representative sample of U.S. consumers and to track the outcomes of disputes filed with the credit bureaus. The results will become public when the FTC reports them to the U.S. Congress late this year.
Unlike younger people who tend to pay attention to their credit rating in making the financial decisions that shape their future, only one in four seniors check their credit score 1.
Seniors need to pay as much attention to credit scores as other age groups because they tend to have lower risk tolerance, less future earning power, the potential to need large amounts of emergency medical funding and less time to recover from a financial loss. As a result, maintaining financial “slack” may be as important – if not more important – for older consumers than for younger people.
“Our results from this study indicate that consumers in general—and senior citizens in particular—need to review their credit reports regularly,” says Thomas H. Eyssell,
associate dean and professor of finance at the University of Missouri-St. Louis, and one of the authors of the pilot study. “Seniors’ lack of attention to their credit reports is troubling, given the potential for errors in consumer credit files.”
According to the latest available Consumer Expenditure Survey, the portion of Americans age 65 with outstanding mortgage debt has increased over time, from 16 percent in 1990 to more than 20 percent in 2009 2. Results from a recent FINRA survey are even more dramatic --- 34 percent of those age 60 and above report having a home mortgage 3. In sum, a substantial proportion of seniors maintain significant debt into their 60s and beyond and they have less ability than in the past to monetize their home’s equity via sale or reverse mortgage.
About Society of Certified Senior Advisors (SCSA):
SCSA educates and certifies professionals to work more effectively with their senior clients. As the leading provider of certification for professionals serving seniors, SCSA’s Certified Senior Advisor (CSA)® credential requires CSAs to uphold the highest ethical standards for the benefit and protection of the health and welfare of seniors. Accredited by the National Commission for Certifying Agencies, the CSA credential is the gold standard for professionals in all areas who work with the senior population. Through a comprehensive educational program, SCSA helps professionals understand the key health, social and financial issues that are important to the majority of seniors. For more information about SCSA, the CSA credential, and SCSA’s education program, visit www.csa.us.
1 FINRA, 2009.
2 U.S. Bureau of Labor Statistics, 2009.
3 FINRA Investor Education Foundation, 2009.