Financial literacy: Many Americans lack it
Jan 08, 2018 Walt Wojciechowski
The unbanked and underbanked have their reasons for frequently preferring to use cash as opposed to credit cards in their day-to-day purchases. A considerable number of those who don't have bank accounts at all simply don't have enough money to justify setting them up. A less common - but no less important - reason is a (perhaps incorrectly) perceived lack of understanding regarding financial matters. But it isn't just the unbanked and underbanked whose financial literacy may be lacking. The same can be said for much of the nation's citizens - "banked" or otherwise. When it comes to financial understanding, 33 percent of respondents in a 2017 Equifax poll gave themselves a "C" average. Much of this may be due to a limited initiative to better inform themselves. For example, in the same poll, when participants were asked what they had done to improve their financial literacy over the course of the previous 12 months, close to 40 percent said they hadn't done anything specific. Of those who had consulted educational resources, 45 percent turned to articles from newspapers or online destinations. 22 percent of 15-year-olds weak in financial proficiency
Financial illiteracy is an issue independent of age, other polls show. Nearly 1 in 4 U.S. -based teenagers - specifically, those who are 15 years old - lack basic financial comprehension skills, according to survey data from the National Center for Education Statistics. In testing conducted by the Program for International Student Assessment, 15-year-old Americans scored lower than teens from six other countries: Spain, Lithuania, Slovakia, Chile, Peru and Brazil, respectively. With age traditionally comes wisdom - but not necessarily in the financial literacy department. In an exam that tested retirees' understanding of how to stretch their dollar further - so it lasts their post-career years for as long as possible - just 5 percent of respondents passed with a B or better, according to the American College of Financial Services. In fact, 74 percent of those who took the examination failed, answering fewer than 60 percent of the questions correctly.

These findings are illuminating, as they help establish that banking status is not necessarily an indication of financial prowess. But given that the unbanked and underbanked have fewer resources available to them, it's incumbent upon the financial services sector to reach out to them where they live, advised Paul Combe, president and CEO of American Student Assistance.
"We must do more to meet the unbanked where they are - where they go to school, where they work, where they gather in the community - and teach them the basics of personal finance," Combe wrote in an opinion piece for The Boston Globe. "That starts with building better networks among educational service providers, schools, government agencies, community service providers, private sector employers and more." Most know prompt payment strengthens credit score
While Americans may have room for improvement, they do understand that when they pay their bills can affect their credit scores. Eighty-seven percent of respondents in the Equifax poll said they believed making payments on time was one way to shore up their credit standing. However, only some of these payments are considered in credit score assessment. That's where alternative credit data comes into play. Alternative credit scoring aids both businesses as well as consumers by rewarding them for their timely payments, taking into account payments such as utilities, cable, internet and phone. Traditional credit scores don't use these pieces of data. Businesses benefit by getting a clearer picture of their customers' financial reliability. Here's a look at one of Microbilt's credit decisioning products.