Millions of Americans ran into financial rough spots during the recent recession, and many are still feeling at least some of the effects today. This has led a majority of consumers to question whether they need help in getting their finances back in order.

The vast majority consumers may find that their finances are still in relative disrepair compared with where they were before the economic downturn, and need significant help in rebuilding their credit standing, according to a new survey from the National Foundation for Credit Counseling. A recent true/false quiz asked consumers to examine their responses to 10 questions related to finances, any one of which would indicate at least some kind of financial distress, and 80 percent of respondents said that upon doing so, they realized they needed a “major overhaul” of their financial lives. Another 13 percent responded that they were in need of a tune-up.

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A number of the major warning signs of financial difficulties revolve around credit card debt and other types of credit, the report said. For instance, consumers whose credit card balances seem to rise every month, or those who have sought new cards because their current ones are drawing perilously close to their limits, might be having deeper issues than just mismanaging these accounts. Further, consumers who regularly make late payments on their various lines of credit, or skip payments altogether, are likely struggling mightily to make ends meet given their current habits.

Consumers might also be facing financial difficulties if they do not know the total amount they owe to their creditors, or have begun to receive phone calls from debt collectors as a result of their defaulting on outstanding balances, the report said. Those who would face financial crises if they were to lose their job, and those who have no savings account to speak of, would likely also do well to take steps to improve their finances.

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For those interested in getting their credit standing to where it once was, it is vitally important to ensure that all bills are paid on time and in full, and outstanding credit card balances don’t approach the account limits. These are the two factors that play most significantly into determining a credit score, and keeping them in good standing is therefore a major part of ensuring credit health.

Image: Mykl Roventine, via Flickr

Millions of Americans ran into financial rough spots during the recent recession, and many are still feeling at least some of the effects today. This has led a majority of consumers to question whether they need help in getting their finances back in order.

The vast majority consumers may find that their finances are still in relative disrepair compared with where they were before the economic downturn, and need significant help in rebuilding their credit standing, according to a new survey from the National Foundation for Credit Counseling. A recent true/false quiz asked consumers to examine their responses to 10 questions related to finances, any one of which would indicate at least some kind of financial distress, and 80 percent of respondents said that upon doing so, they realized they needed a “major overhaul” of their financial lives. Another 13 percent responded that they were in need of a tune-up.

[Free Resource: Check your credit for free before applying for a credit card]

A number of the major warning signs of financial difficulties revolve around credit card debt and other types of credit, the report said. For instance, consumers whose credit card balances seem to rise every month, or those who have sought new cards because their current ones are drawing perilously close to their limits, might be having deeper issues than just mismanaging these accounts. Further, consumers who regularly make late payments on their various lines of credit, or skip payments altogether, are likely struggling mightily to make ends meet given their current habits.

Consumers might also be facing financial difficulties if they do not know the total amount they owe to their creditors, or have begun to receive phone calls from debt collectors as a result of their defaulting on outstanding balances, the report said. Those who would face financial crises if they were to lose their job, and those who have no savings account to speak of, would likely also do well to take steps to improve their finances.

[Credit Cards: Research and compare credit cards at Credit.com]

For those interested in getting their credit standing to where it once was, it is vitally important to ensure that all bills are paid on time and in full, and outstanding credit card balances don’t approach the account limits. These are the two factors that play most significantly into determining a credit score, and keeping them in good standing is therefore a major part of ensuring credit health.

Image: Mykl Roventine, via Flickr

This week the experts from Credit.com contributed to a wide range of publications on subjects including taxes, identity theft, credit scores, credit cards and debt. Check out the hits…

Credit.com co-founder, Adam Levin was called on by PBS News Hour with Jeffrey Brown to sit on a panel for a show in their series, After the Fall. Adam and the panel discuss how consumers are treating credit and debt today compared to years past and how it will affect the future for credit lenders and borrowers. @Adam_K_Levin @NewsHour

Watch People, Banks ‘Still Cautious’ on Credit, Debts on PBS. See more from PBS NewsHour.

Adam was also asked to provide tips for summer travelers on keeping their money and valuables safe. Always happy to help consumers, Adam offers practical recommendations for those embarking on travel this year. @CBSPhilly

Susanna Kim from ABC News called on our resident debt expert to weigh in on the very heavy subject of debt after death. In this story the focus is on one family who’s son died at 23 years of age leaving them with his student loan debt. Gerri points out how common this unfortunate situation can be. The family is working to be absolved of their son’s debt, and have started a foundation to fight the entire practice of saddling families with this kind of financial drain.

Susanna also sought Gerri’s take on the reality of student loans. They have become incredibly complex and can lead to life-long financial issues. This is why Gerri recommends taking student loans incredibly seriously, to know what you’re getting into and to always keep an eye on the status of your loan. It’s the complexity of the loan that lenders could use against these often-inexperienced students. @skimm @ABCNews @Gerridetweiler

This week the experts from Credit.com contributed to a wide range of publications on subjects including taxes, identity theft, credit scores, credit cards and debt. Check out the hits…

Credit.com co-founder, Adam Levin was called on by PBS News Hour with Jeffrey Brown to sit on a panel for a show in their series, After the Fall. Adam and the panel discuss how consumers are treating credit and debt today compared to years past and how it will affect the future for credit lenders and borrowers. @Adam_K_Levin @NewsHour

Watch People, Banks ‘Still Cautious’ on Credit, Debts on PBS. See more from PBS NewsHour.

Adam was also asked to provide tips for summer travelers on keeping their money and valuables safe. Always happy to help consumers, Adam offers practical recommendations for those embarking on travel this year. @CBSPhilly

Susanna Kim from ABC News called on our resident debt expert to weigh in on the very heavy subject of debt after death. In this story the focus is on one family who’s son died at 23 years of age leaving them with his student loan debt. Gerri points out how common this unfortunate situation can be. The family is working to be absolved of their son’s debt, and have started a foundation to fight the entire practice of saddling families with this kind of financial drain.

Susanna also sought Gerri’s take on the reality of student loans. They have become incredibly complex and can lead to life-long financial issues. This is why Gerri recommends taking student loans incredibly seriously, to know what you’re getting into and to always keep an eye on the status of your loan. It’s the complexity of the loan that lenders could use against these often-inexperienced students. @skimm @ABCNews @Gerridetweiler

In my recent Credit.com column, Credit Score Obsessed? Don’t Be, I likely surprised many readers by recommending that consumers pay less attention to their credit score and focus their credit management energies on their credit report. This column is likely to be more expected because I want to offer what I believe is good and beneficial about credit scoring. The benefits of a good credit score are relatively well known. Lenders and other institutions that use credit scores are more likely to offer better terms and lower-cost credit to those who have high credit scores. But other consumer benefits from credit scores aren’t as well known. In fact, credit scores have played a role in lowering the cost of credit and expediting the credit application process, to name just two of the advantages they afford consumers. In the U.S., manual credit underwriting was an incredibly arduous process before the introduction and widespread use of credit scores in the late 1970s and early 1980s. It was common to wait 30 days to find out whether you were approved for a loan—or even a credit card.

Back in those days, lenders would have hundreds—or sometimes thousands—of loan officers across the country individually evaluating credit files. These loan officers would obtain copies of applicants’ credit files and use a combination of their own judgment and corporate criteria to interpret the credit file. Their personal interpretation of consumer credit files was part of the loan decision. It is difficult to apply fair and unbiased judgment in a uniform manner under this scenario.

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About 30 years ago, use of credit scores became the norm and lenders gained the ability to expedite underwriting so that consumers could walk into a car dealership and drive out with a car. The automation provided much needed objectivity and dramatically improved efficiency.

In fact, according to a study from the Information Policy Institute referenced in a 2007 TransUnion white paper, 84 percent of automobile loans received a decision within an hour, and 23 percent of automobile loans received a decision within 10 minutes.

The era of waiting days for a loan decision is thankfully over, but that’s not to say that credit scores can or should take the place of prudent underwriting. Credit scores contribute to, but are not a substitute for, sound underwriting practices. Credit scores should be a part of any decision process for credit approval, but not the sole criterion. Credit scores provide lenders with consumers’ likelihood to pay based on previous behavior, but do not provide lenders with an indication of consumers’ ability to pay. Lenders can accomplish this by obtaining additional information such as employment status and income.

[Related Article: What's a Credit Score? Really.]

It’s not just the time savings that credit score models provide. Lenders have stressed that costs go down when credit scores are used effectively. In 2008, Jack Forestell, Senior Vice President at Capital One Financial Corporation, testified in front of the Subcommittee on Oversight and Investigations, which is part of the U.S. House of Representatives Financial Services Committee, and said, “Credit scores help us extend credit to a full range applicants, including those in underserved populations. In addition, using credit scores in conjunction with automated models makes our underwriting more efficient, which ultimately drives down the cost of credit for our customers.”

Mr. Forestell’s comment is applicable today. Right now, we’re in an environment of protracted lending—particularly in the mortgage market. With a limited number of loan applicants and originations, lenders need to broaden their lending targets without creating risk uncertainty. Here again, credit scores are part of the solution.

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According to a 2006 Brookings Institution study, between 35 and 54 million adults in the United States live outside of the credit mainstream. Many of these consumers are assumed not to have credit histories, or are considered “thin file” by other credit scoring models. There is no uniform definition of “thin file,” but many typically interpret that to mean a consumer with fewer than three accounts in one’s credit file. Using VantageScore Solutions data we’ve learned a couple of things: of the tens of millions of people who were previously considered “thin file,” 15.5% were found to fall into super-prime or prime credit bands. That means somewhere between 5.5 and 8.5 million people who may be thought to have little or no credit history, could actually have really great credit. (Vantagescore provides a score to consumers who had activity up to two years ago on at least one of the credit accounts in their file, whereas traditional credit scoring methods generally require that the activity is not older than six months.)

Two final thoughts: Credit scores, when properly applied, help match consumers with the right kind of credit. And finally, they provide an incentive for consumers to practice healthy financial decision-making…and that’s good for all of us.

This story is an Op/Ed contribution to Credit.com and does not represent the views of the company or its affiliates.

Image: Ksayer1, via Flickr