The Consumer Federation of America said today that in a survey of more than 1,000 Americans only 1/3 correctly understood that a credit score represents the risk that a person will not repay a loan. 

"Now that credit scores are increasing 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.  "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 records maintained by Experian, Equifax and TransUnion, the three major credit agencies.  These agencies track the amount of debt and repayment histories of consumers.  These histories result in a credit score also known as a FICO score.

The higher one's credit score, the more likely it is that you will be able to obtain the most competitive rate.  The difference between having a FICO score of 720 and 560 could be as much as 3 percent; 5.5% vs. 8.5% in today's market.  That's a difference of thousands of dollars in annual mortgage payments. 

A three-bureau combined credit report with three FICO scores (each credit agency assigns their own) is available from myfico.com for $38.85.

What this means….always, always get a copy of your credit report before applying for a home loan.  Not only can you review the report for accuracy but equally important you will know if your lender is trying to pull a fast one by blaming your credit history for a higher rate.