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% 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% erroneously believe that credit scores can be obtained for free once a year. (They are probably thinking about their credit report, instead). Those are amonth the findings of a new report, "Consumer Understanding of Credit Scores Inproves but Remains Poor" commissioned by the Consumer Federation of America.
First your credit socre 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 crcumstances, 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 to 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.
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