Many Americans have questions about how credit scores work. Here's what to know about a good score

Many Americans continue to struggle with personal-finance issues, and it shows up in rising credit card balances, loan delinquencies, a reluctance to invest rationally and even an inability to obtain routine bank accounts. The consequences can include poor credit scores and suboptimal investment returns.

Here are some recent developments in some of those areas:

Credit scores are confusing to many

Among the topics that perplex people, credit scores are up there. In fact, "What is a good credit score" was the most widely searched personal finance question on Google, according to a study by lender OneMain Financial. That topic elicited more than 160,000 internet searches in a recent month — more than the next nine highest questions combined.

Credit scores are numbers that summarize the likelihood that you will repay a loan, including bills for utility services. Credit scores allow quick evaluations by lenders so that you can, for example, gain approval for an auto loan while waiting at a dealership.

There are different credit scores, but the widely followed FICO standard sets a range between 300 and 850. Scores are determined by your history making payments on loans, paying bills on time, how many credit accounts you have and so on. But factors that don’t affect your FICO score include income, job status, gender and race.

The lower your score, the harder you will find it to obtain credit on favorable terms. The federal Consumer Financial Protection Bureau considers subprime scores as those below 620, near-prime scores between 620 and 659, prime scores between 660 and 719, and super-prime from 720 and up.

“A consistent payment history, keeping your debt low and avoiding too many credit requests will gradually improve your credit score over time,” said OneMain Financial. Credit scores usually don't improve quickly. Rather, they reflect your ongoing ability to manage debts and payments.

Other top questions searched over the Internet include “How many credit cards should I have?” with about 21,000 recent monthly inquiries and “What is compound interest?,” at about 15,000.

There’s no right answer on the number of credit cards. Having at least two cards can help in case one gets lost, stolen or the account frozen. But owning more than a few cards can be problematic too, because of duplicative fees and having too much borrowing capacity, which can hurt your credit score.

Compound interest refers to the concept of earning interest on your interest, or paying interest on interest. For example, if you start a savings account with $100 and earn 5% annually compounded, you would have $105 after one year and $110.25 after the second year, rather than $110 (under a simple-interest scenario).

As a postscript, the CFPB on May 31 ordered OneMain to pay $20 million for deceptive sales practices, suggesting that "What should I beware of in a lender" might also be a worthwhile search question.

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Should the Post Office be your bank?

The U.S. Postal Service is widely recognized by the public, with offices all over the country. Would those qualities make it good provider of financial services?

The Save the Post Office Coalition released a new report that advocates just that. The coalition would like to see the USPS expand a check-cashing pilot program and roll out other services such as bill payment, wire transfers, low-fee ATMs and money transfers to recipients in more foreign countries.

“The Post Office is an ideal place to offer a public-banking option, thanks to its trained workforce, public-interest mission, high level of public trust and over 30,000 locations in communities across the country,” the report said.

The Postal Service does offer some services but in limited form or with fees that are higher than necessary, the coalition said. It contends that more services are urgently needed by the 10 million or so unbanked individuals, including many lower-income and less educated Americans, people of color and single mothers, the coalition said.

However, some progress has happened. The Federal Deposit Insurance Corp., in its latest study on unbanked Americans, estimated just 4.5% off households didn’t have any checking or savings accounts at a bank or credit union. The unbanked percentage has dropped from a recent peak of 8.2% in 2011, shortly after the last recession, according to the FDIC.

When high cash balances aren't so good

Millions of people hold a lot of their wealth in bank savings accounts, money market funds and other liquid, cash accounts — and that might not be such a good thing, says researcher Morningstar. In a new report, the company contends that high cash balances often reflect the reality that a lot of Americans aren't comfortable investing in areas that can generate higher returns.

About one in four relatively seasoned investors that the company polled recently said they're uncomfortable making investment decisions, with nearly two-thirds of those complaining that they aren't knowledgeable enough. As a result, they park much of their wealth in cash accounts — about 42% on average for people deemed in the unknowledgeable group.

Americans have access to more investment information than ever, "but there is still confusion and uncertainty about what information can be used, what is valuable and what is just noise," Morningstar said.

Morningstar estimates there are around 750,000 investment options available to mainstream investors if you count all of the stocks, bonds, mutual funds, exchange-traded funds, bank accounts, cryptocurrencies and other possibilities. Financial advisers can help investors cut through all of that clutter, the company said.

Reach the writer at russ.wiles@arizonarepublic.com.

This article originally appeared on Arizona Republic: What's a good credit score and how do you improve your number?