Consumers understand credit scores better than ever, but that still isn’t good enough, according to a survey commissioned by the nonprofit Consumer Federation of America (CFA) and Providian Financial.

“In the past year, consumer understanding of these scores has improved, in part because many consumers have obtained their scores,” says CFA Executive Director Stephen Brobeck. “Unfortunately, most consumers still do not know basic facts about credit scores and their financial significance.”

A wide range of businesses — not just creditors — use credit scores in product pricing and availability. The costs related to having a low score can be considerable. Savings available to those with high scores also can be substantial.

“If consumers were to raise their credit scores by only 30 points on average, they would save $16 billion on lower credit card finance charges alone,” says J. Christopher Lewis, Providian’s chief public policy officer.

In 2003, 31 percent of those surveyed by Opinion Research Corporation said they had obtained their credit scores. From 2004 to 2005, the percentage obtaining their scores from credit bureaus increased from 28 percent to 36 percent. In contrast, those obtaining their scores from mortgage lenders or brokers fell from 35 percent to 28 percent.

The increasing number of people familiar with credit scores appears to account for rising consumer understanding of these scores.

In 2004, surveys showed that 87 percent of consumers understood that making payments on time influences their credit score. In 2005, that number was up to 93 percent. During the same time, those realizing that maxing out one’s credit card has a negative effect on their credit score rose from 66 percent to 77 percent.

Despite these numbers, however, more than three-fourths mistakenly believe that they have the right to obtain their credit score for free once a year.  While that’s true of your credit report, it’s not true for your credit score.

Consumers also remain confused about the characteristics of credit scores.

• Only 27 percent understand that scores measure credit risk, not credit knowledge, amount or attitude. Less than half of consumers realize they have more than one credit score — one for each major credit bureau and possibly others.
• Only 54 percent understand that maxing out a credit card and making only the minimum required payment will both lower your credit score.

Many consumers do not understand how lower credit scores cost them money. For example, consumers with credit scores of more than 760 will be charged 5.24 percent interest on a $150,000, 30-year, fixed-rate mortgage; their monthly payments will be $844. Consumers with credit scores less than 620, however, will pay 7 percent interest rates with monthly payments of $998. That’s an annual difference of $1,848.

So how do you raise your credit score?

• Pay your bills consistently and on time.
• Don’t “max out” credit cards or other revolving credit.
• Pay off debt rather than just moving it around.
• Don’t open many new accounts.
• Check your credit report, which is now free, for errors.

To test your knowledge of credit scores, go to www.consumerfed.org/score.