A consumer with a credit score of more than 720 signing for a $150,000, 30-year, fixed-rate mortgage, will get a mortgage rate of about 5.72 percent and pay $872 a month.

Consumers with credit scores below 560 will be charged a 9.29 percent rate with monthly payments of $1,238 if they can qualify for the loan.

The annual difference is $4,392, according to Fair Isaac Co., the San Rafael, CA company the developed the most popular credit scoring system called FICO.

The glaring example of what a difference credit scores can make is used to hammer home a point -- when it comes to credit scores, what you don't know can hurt you, according to "Most Consumers Don't Understand Their Credit Scores," a joint-study released yesterday by consumer advocacy group Consumer Federation of American and San Francisco-based Providian Bank.

The new report found that only about one-third (34 percent) of consumers fully understand credit scores. The rest could be making mistakes that lower their scores and their chances to land a mortgage or a cheaper interest rate.

It gets worse.

While mortgage lenders examine credit reports, they rely most heavily upon credit scores to approve or decline loan applications. Credit scores are also used to grant or refuse a host of credit and other services including jobs, insurance, rental housing and utility services.

Consumers Federation found that of 1,027 consumers surveyed by Opinion Research Corporation International, 65 percent of them incorrectly believe that credit scores evaluate income, age (38 percent) and marital status (37 percent), rather than credit history.

"Credit scores are relatively complicated. It is a substantial challenge for the financial press and consumer press to provide information about this fairly complicated issue," said Stephen Brobeck, the federation's executive director, during a press conference Sept. 21 to release the information.

Credit scores -- issued by the three major credit reporting bureaus: Equifax, Experian and TransUnion -- are a numerical analysis of a consumers' creditworthiness -- a statistical rendering of a consumer's likelihood to default on a credit payment. The score considers payment histories, level of indebtedness, available credit levels, available credit use, types of credit, and other related data.

The traditional FICO score runs from 300 to 850 -- the higher the score the more creditworthy the consumer. A new FICO "Expansion" score, available only from Fair Isaac for non-traditional credit consumers, looks at a consumer's payment habits absent credit cards, consumer loans and the like for a score ranging from 150 to 950.

Unlike credit scores, credit reports -- also reported by the three major credit bureaus -- track credit consumers' payment records by individual credit account and reveal how well or how poorly each account is being paid. The reports also include credit requests, notices of liens, judgments and other "derogatory" remarks as well as remarks from the consumer, among other information.

The Consumer Federation survey also found:

• Forty-three percent incorrectly believed consumers have only one score. Each of the three major credit bureaus computes separate scores and they typically differ.

• Only 12 percent correctly identified the low 600s as the level below which consumers are denied credit or have to pay higher rates, while only 13 percent knew that scores above the low 700s usually qualify them for the best rates.

• Forty percent didn't know that paying off a large balance on a credit card will improve your credit score.

• Twenty-eight percent believed incorrectly that using a credit card's full credit line will improve a score.

• Seventy-two percent believed that they can obtain their credit score for free once a year. That's only true under a new law if you apply for a mortgage.

"I'd be very surprised, however if in eight months when we have the results of a similar survey if we don't see progress," Brobeck said.

The survey's release coincides with the availability of CFA's new "Do You Know the Score on Credit Scores?" online educational test which helps consumers learn what they don't know about scores.

Leading credit score system provider, Fair, Isaac, Co. also provides extensive credit scoring information for consumers at MyFico.com.

In a nine-month roll-out beginning on the west coast on December 1 2004 and spreading to the east coast by September 1, 2005, a new federal rule -- the Fair and Accurate Credit Transactions Act (FACTA) which amends the Fair Credit Reporting Act (FCRA) -- will grant consumers one free copy of their credit report from each of the three national credit reporting agencies. There will be an additional charge for obtaining a credit score, unless you are applying for a mortgage.

Credit reports are already free under certain conditions, including if the report was used to deny you credit, insurance or a job, if you are unemployed, are on welfare or think you are a victim of fraud.

Also a handful of states already have access to a free annual credit report. Californians, for example have had free access to credit scores since 2001, but only when they apply for a mortgage.

The Consumer Federation study was the group's second such report. Last year, it produced a study with different questions to examine consumers' knowledge of both credit scores and credit reports. "Consumers Lack Essential Knowledge, And Strongly Support New Protections, On Credit Reporting and Credit Scores" was used to provide testimony before the U.S. Senate Banking Committee at a time when the committee was hashing out amendments to the federal Fair Credit Reporting Act.

Consumers Federation says the most effective steps you can take to improve your score are to pay bills on time, quickly get current after you've missed a payment, don't max-out your credit card limits, pay off debt rather than move it around, don't open or apply for new accounts rapidly and check your credit report at least once a year and especially before you apply for major credit like a mortgage.