Did you know that credit scores affect everything from the interest people pay on mortgages to whether they qualify for auto insurance? More and more landlords are checking credit reports prior to renting to a potential tenant as well as employers prior to offering jobs to potential employees. The Consumer Federation of America said that a survey of more than 1,000 Americans found that only one-third correctly understand that credit scores indicate the risk of not repaying a loan. More than half incorrectly believe a married couple has a joint credit score.

"Now that credit scores are increasingly used by utilities, insurers and employers, as well as creditors, it is essential for consumers to learn their score and what it means," said Stephen Brobeck, executive director of the CFA, a nonprofit advocacy group based in Washington, D.C. "The cost of not knowing your score and its significance could be not only denial of credit but also difficulty obtaining needed services and even a job."

Credit scores are derived from reports kept by Experian, Equifax and TransUnion and scores will vary with each bureau. The credit score is factored upon many variables and understanding how a score is conceived is both complex and confusing. Some of the factors include: age of open accounts, the number of revolving accounts (credit cards/lines of credit), ratio of outstanding balance to credit limit on revolving trade lines, number of late payments, existence of collection accounts, charge-offs, judgments, and so on.

The survey found that a majority of Americans don't know credit scores are being used for purposes beyond borrowing. It found that many don't know how to improve their scores. Alan Elias, a senior vice president with Providian Financial, a San Francisco-based credit-card company, said "the single most important way to protect your score is ensuring that payments arrive on time each month." Having a low credit score can cost consumers a lot of money. The report looked at the likely interest rates consumers would be charged for mortgage loans based on different FICO scores, which are developed by Fair Isaac of Minneapolis

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A borrower with a score below 560 will likely face an interest rate of more than 4% higher than a borrower with a FICO score of more than 720 on a 30-year, fixed-rate mortgage of $150,000. That's a difference of several thousands of dollars a year in mortgage payments. Consumers with scores below 660 are typically charged relatively high loan rates, while those with scores above 700 are generally charged relatively low rates. Those with scores above 760 generally get the best rates and terms.

Consumers can purchase their credit scores and credit reports from the major credit agencies at www.experian.com, www.equifax.com and www.transunion.com. Under a new federal law consumers applying for mortgages will be able to obtain their score for free from lenders.

If you would like to receive your credit scores and reports at a discounted cost, you simply need to fill out a home loan application with me. You can do so by applying online or by phone by calling (866) 366-5724. If you have any questions regarding credit scores and reports, please feel free to contact me. I look forward to earning your business.

*survey results were provided by the article entitled "Knowing your score is vital, says expert" by EILEEN ALT POWELL at The Associated Press

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