Too many consumers still don't get it when it comes to credit scores.

And what you don't know about credit scores can hurt you when it's time to buy a home -- especially in a tight credit market.

Only 28 percent of consumers are aware they need at least a 700 credit score to qualify for a low-rate mortgage.

Three of every four consumers incorrectly believe that credit scores are influenced by income.

And even more, 79 percent, erroneously believe that credit scores can be obtained for free once a year. (They're probably think about their credit report, instead.)

Those are among the findings of a new report, "Consumer Understanding Of Credit Scores Improves But Remains Poor" commissioned by the Consumer Federation of America (CFA) and Washington Mutual Bank (WaMu).

First, your credit score is a number assigned to your creditworthiness.

Your credit score indicates how well or how poorly you'll repay a debt. The higher the number, the more likely you'll repay on time.

Your bill paying information on credit reports provides the basis for your credit score.

Consumers who take the time to obtain their credit score, for only about $15 under most circumstances, are more likely to have a better understanding of the scores.

That includes knowledge that mortgage lenders rely heavily upon credit scores to approve or reject home loan applications.

Informed consumers also know they can generally raise their credit score by consistently paying bills on time every time; by paying off debt and closing those paid off accounts; by not coming close to maxing out credit cards and by regularly checking their credit reports to make sure they are accurate.

Your credit report is free from AnnualCreditReport.Com. For more information about your credit score go to MyFICO.com.

The study also found that consumers could save $28 billion a year in lower finance charges if they improved their credit scores by 30 points.

"Lack of consumer knowledge about credit scores not only increases the costs of their credit and insurance, but also reduces the availability of these and other services," said CFA Executive Director Stephen Brobeck.

The study's findings include:

• When asked to define "credit score," only 31 percent correctly identified the answer "risk of not repaying the loan" in a multiple choice question that also included "financial resources to pay back loans" (21 percent), "amount of consumer debt" (16 percent), "knowledge of consumer credit" (15 percent), and "attitude toward consumer credit" (9 percent) as other options.

• Consumers typically fail to understand that a credit score reflects only how they use credit, not factors such as income and age. Significant percentages incorrectly believe that credit scores are influenced by income (74 percent); age (40 percent); marital status (38 percent); the state in which they live (29 percent); level of education (29 percent); and ethnicity (15 percent).

• Majorities correctly understand that they can learn their credit scores if they are denied a mortgage loan (72 percent) or declined for a credit card (65 percent). But, an even larger group, (79 percent), incorrectly believes that credit scores can be obtained for free once a year. Only credit reports are free every year.

Published: July 15, 2008

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.