The spring homebuying season is set to kick off, but how many Americans have their credit score in tip-top shape to lock in that ideal rate for the largest purchase of their lifetime? A new study by Zillow  has found that the average American does not fully understand exactly what causes their credit score to change and what impacts their score.
When asked five questions about credit scores, the average American answered only two correctly, according to Zillow. The struggle to understand credit scoring wasn’t limited to just younger Americans that may have less experience building and utilizing credit. Only a quarter (25%) of members of Generation Z, the youngest generation, answered at least three questions correctly, the lowest among all generations surveyed. But fewer than half of Americans in the older millennial (35%), Generation X (47%), and Baby Boomer/Silent Generation (41%) cohorts were able to answer at least three of the five credit questions correctly.
Quiz-takers were most likely (67%) to correctly answer that investments in the stock market do not typically impact their credit scores. Less than half (47%) correctly answered that credit scores can affect your mortgage until the day you close, and just 41% knew that you should wait at least six months after taking out a car loan before applying for a mortgage.
Zillow research found a borrower with a "fair" credit score could pay 7% more over the life of a 30-year mortgage for the same home as an otherwise identical borrower with an "excellent" score.
A recent report from the NY Fed's Center for Microeconomic Data  shows that median credit scores for mortgages of first-time homebuyers ended 2020 at around 740. This represents a far higher average than credit scores that were in the 680-700 range from 2002-2007.
Shoppers are lining up  to purchase homes, with record-low rates still driving a market short on supply  and high on competition. But, as Zillow suggests , before potential buyers begin their house-hunting journey, they should understand what impacts their credit score and how it affects their buying power and budget.