U.S. consumers remain in the dark about how the credit-scoring system works in obtaining mortgages, insurance, and credit cards, costing individuals as much as $28 billion each year, a survey concluded.

Taking steps such as paying bills on time and not maxing out credit cards will improve scores, the Consumer Federation of America and Washington Mutual Inc. said at a news conference in Washington Thursday.

"The good news is they know more about what will affect their scores," said Stephen Brobeck, executive director of the Consumer Federation. "The bad news is they don't know what their score means."

The survey showed improvement from previous years, with 28% correctly identifying 700 as the minimum score to qualify for a prime mortgage rate, up from 24% last year.

Washington Mutual, of Seattle, and the consumer group surveyed more than 1,000 Americans in June; its findings have a margin of error of plus or minus 3%.

People responding to the survey did not understand that credit scores are based on payment histories and how they have used credit in the past. Many respondents said factors such as income, age, marital status, and education levels influence credit scores, the Consumer Federation said. They do not.

Raising a credit score by 30 points translates into an annual credit card finance-charge saving of $105, according to Anthony Vuoto, the president of Washington Mutual's card services unit.

If all consumers raised their scores by that margin, the savings would reach $28 billion, he said.

Washington Mutual provides its credit card customers with their FICO scores free, Mr. Vuoto said.

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