Want to improve your credit score? Think like an insider

There's little doubt that Americans with higher credit scores get better deals on core consumer items like mortgages, auto loans and credit cards.

So why do so many U.S. consumers know so little about their credit scores?

According to the Consumer Federation of America, 40 percent of Americans didn't know that credit card companies use credit scores to make decisions about credit approval and interest rates, and another 42 percent didn't know mortgage lenders do the same thing.

And there's more...
  • 43 percent of U.S. adults believe age is a factor in calculating interest rates (It's not.)
  • 40 percent believe marital status is a factor in credit score calculations (It's not, either.)
  • Up to 35 percent of consumers don't know that creditors are obligated to report the credit score used in making a credit decision.

"Credit scores have become so influential in the lives of most consumers that tens of millions are severely disadvantaged by their lack of knowledge about these scores," says Stephen Brobeck, CFA executive director. "Low credit scores will often cost car buyers more than $5,000 in additional finance charges and cost home purchasers tens of thousands of dollars in additional mortgage loan costs. And low scores are likely to limit consumer access to, and increase the cost of, services such as cell phone service, electric service and rental housing."

Consequently, job No. 1 for consumers is to know their credit score, know what calculations drive their credit scores, and know what to do to improve those credit scores.

One way to check all three of those items off your list is dig deeper and find out what drives the insiders at credit scoring firms (like TransUnion, Experian or Equifax) when they calculate credit scores.

After all, if you know how a credit score analyst thinks, then you're well on the way to knowing what shapes your credit health, and how to improve that credit health going forward.