Magic Wands of No Use

In a bedtime scene, a husband, chatting with his wife, surmises that a “credit fairy” may have something to do with their credit scores improving.

No, it's not magic, the wife responds. “It's because I've been paying the bills on time.”

That's from a TV spot in an awareness ad campaign developed for the Consumer Bankers Foundation and the Leadership Conference on Civil Rights Education Fund.

“We want to help people by telling them how they can make their credit scores better,” Joe Belew, president of the Consumer Bankers Assn., says at an auto financing conference in San Francisco.

The TV and radio public service announcements urge consumers with financing issues to take responsibility for their credit scores. The ads direct them to a website (www.creditfairy.org) for tips and simple steps that can be taken.

“Research shows a lot of people don't know how to move up their credit scores,” Belew tells Ward's. “We point out that ways to do it include paying bills, not maxing out on credit cards and not taking a lot of credit cards out at the same time.”

The campaign targets low to moderate-income Americans of all ages and ethnicities with some form of credit.

Overall, members of that socio-economic group know basic credit facts and the importance of good credit. But they tend not to monitor their credit situation or work to improve it, according to lending data.

Credit scores are calculated using various criteria, including past payment history (35%), amount of debt owed (30%), types of established credit (10%), length of time credit has been established (15%) and requests for new credit (10%).

The use of credit scores by lenders and other financial institutions has surged in recent years.

Indirect auto-loan delinquencies (payments more than 30 days past due) reached 3% in the last quarter of 2007, the highest rate in 17 years, says the American Bankers Assn.

That may or may not be a serious situation, says Emily Kolinski Morris, a senior economist for Ford Motor Co.

“Delinquent loans don't look that bad yet,” she says. “But they tend to be a lagging (economic) indicator.”