Manage your credit well and watch your credit score improve

How much does your credit score matter? A lot.

Borrowers with low credit scores can pay around $5,000 more in finance charges for a car purchase and tens of thousands of dollars more on home purchases, experts say. It can also limit access to or increase the cost of cell phone service, electric serve and rental housing.

Consumer Federation of America and VantageScore Solutions, a Stamford, Conn., credit rating system developed as an alternative to FICO scores, released a consumer survey recently that revealed that many Americans know little about credit scores. More than 1,022 adult Americans were quizzed by telephone.

Here are some of the survey’s findings:

•  Two-fifths do not know that credit card issuers and mortgage lenders use credit scores in decisions about credit availability and pricing.

•  Two-fifths incorrectly believe that personal characteristics such as age and marital status are used in calculating credit scores. They are not.

•  Between one-quarter and one-third do not know when lenders are required to inform borrowers of the credit score used in their lending decision. Lenders must inform consumers about their score after they apply for a mortgage, when they are turned down for a loan, and when they don’t receive the best price or other terms.

•  Between one-third and two-fifths do not know that the credit scores of co-signers of a student loan are affected by that loan improving if payments are made on time and declining with one late payment.

•  More than one quarter do not know key ways to raise or maintain their scores — keeping credit card balances low and not applying for several cards at the same time.

•  More than one-third incorrectly believe that credit repair agencies are always or usually helpful in correcting credit report errors and improving scores.

•  A credit score is based on payment history. It takes about nine months, on average, for a consumer with a low score to bring it back up, except in the case of bankruptcy. Raise your score by:

•  Consistently paying bills on time every month.

•  Not maxing out, or even come close to maxing out, credit cards or other revolving credit accounts.

•  Paying down debt rather than just moving it around, as well as not opening many new accounts rapidly.

•  Regularly checking credit reports to make sure they are error-free.