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'The Most Important Financial Number'

To help consumers learn more about credit scoring, CFA and Fair Isaac have teamed up and produced a new brochure that is being distributed at no cost by the federal government's Federal Citizen Information Center.

"Credit scores are becoming the most important financial number in people's lives," Brobeck said during a teleconference.

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To get a copy of "Your Credit Scores," contact the center at 888-878-3256 or write to: Credit Scores, Pueblo, Colo. 81009. The brochure is also available online at www.pueblo.gsa.gov. Click on the link for "Your Credit Scores Publication."

So what is it that you don't know that you should know about credit scoring? Here are some basic facts:

• FICO credit scores range from 300 to 850. A score above 700 indicates you are a relatively low credit risk and will likely qualify for the best interest rates. Consumers with scores below 600 are typically charged higher loan rates. A low credit score can cost you not only thousands of dollars a year in additional finance charges, but you might also be denied insurance, telephone service, an apartment or even a job.

• You don't have just one credit score. Each of the three major credit bureaus -- Equifax, TransUnion LLC and Experian -- generates a credit score on you. That means you could have three different credit scores because your credit history at each bureau may be different.

• Not all lenders use all three credit scores. Some may grant you credit or approve your auto loan, for example, based on a single bureau's score or all three. Mortgage lenders typically consider all three of your credit scores. In the case of a home loan, lenders often use the score that falls in the middle (not an average of the three).

• The two most important factors in determining your credit score are your payment history (do you pay your bills on time?) and how much you owe.

• The fastest way to raise your credit score is to pay bills promptly and keep your credit card balances low. Want a better score? Then pay off debt rather than moving it from one credit card to another.

Features in the brochure that I find extremely useful are the hypothetical examples of how certain credit usage can change one's credit scores for the better or worse over time.

In one example, a woman starts out with a credit score of 780. However, she divorces and her ex-husband agrees to make the payment on two joint credit cards. (She doesn't realize her name is still on the cards.) The ex then nearly maxes out the cards and fails to make payments on time. As a result, the woman's credit score drops 180 points to 600.

When the woman gets her former husband to roll over the balances on both cards to a new card that he opens in his name only, paying off the two accounts improves her score by 80 points (in just one month).

"We hope this new brochure can clear up a lot of confusion about credit scores," said Cheri St. John, vice president of global scoring and consumer solutions for Fair Isaac.

Even if you think you know it all, get this brochure. Because when it comes to your credit score, knowledge isn't just power. It can amount to real cost savings.

Listen to Michelle Singletary discuss personal finance every Tuesday on NPR's "Day to Day" and online at www.npr.org. Readers can write to her at The Washington Post, 1150 15th St., N.W., Washington, D.C. 20071 or send e-mail to singletarym@washpost.com. Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please also note comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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