Federally chartered market-makers Fannie Mae and Freddie Mac became convinced years ago that here was a tool that could accurately predict the likelihood of default in the mortgage loan process. Furthermore, this tool was blind to such hot-button issues as race, gender, and marital status.

Since then, lenders have increasingly focused on this three digit number as a way of sizing you up financially in under a minute, and the news today is that the American public has not yet gotten that message.

A recent study, commissioned by GMAC Mortgage, shows that many Americans are simply unaware of the importance of a satisfactory credit score in the home buying process. And to make matters worse, of those who do understand, there are substantial misconceptions.

The study was conducted in May of this year, and was weighted by age, sex, race and geographic region to ensure an accurate representation of the nation. Over 1000 adults were asked questions related to the importance of their credit score. The group apparently reflects America accurately:

* Over two-thirds own their own home, while nearly 29% rent. This matches exactly our all time high homeownership rate of 69%.

* Over half the respondents (54.2%) have lived at their current home six years or more, while just over a third (36.5%) have lived at their current residence for ten years or longer.

* Over a fifth of respondents (21.1%) report that they plan on purchasing a new home in the next 24 months. This bodes well for the housing market in the next couple years.

* When asked to assume that they will be purchasing a new home in the next 2 years, over half of respondents (51.2%) report that they would request a credit check on their own prior to going through the mortgage loan process. This indicates an awareness of the importance of credit in general.

But here is where the misconceptions begin to arise:

* Of those respondents reporting that they will request a credit check on their own, the majority (64.1%) say they would request this credit check six months or less in advance of the pre-approval process.

The problem here is that six months lead time may not be enough to clean up any errors or problems found not only on the credit report, but also reflected in the three digit credit score.

I have always recommended that you start looking at your credit report a full year before you plan to make a home purchase, just because creditors are often slow to correct errors, and sometimes demand to see written proof of their mistakes.

And here is where our collective lack of knowledge shined through:

* The majority of respondents (62.3%) do not know what credit score is needed to obtain a good rate on a home loan. In addition, while over a fifth of respondents (20.9%) think that a credit score of more than 700 is needed, 16.8% of respondents believe that a credit score of less than 700 is needed in order to obtain the best loan rate.

Lenders say their best home loan programs are reserved for those with credit scores of 680 or better. In some cases, the very best rates can call for a minimum score of 720.

According to national credit repository Experian, the credit score of the average American consumer is 677, while they say the score of the average Georgia consumer is a low 666. That score, coupled with a steady job and adequate savings, would likely allow a buyer to be approved, but perhaps not for the very best loan available.

When asked to name the steps they have taken or are taking to improve their credit, the vast majority of respondents (84.8%) report that they pay bills on time. This number is encouraging because on-time payment accounts for the largest part of your credit score, some 35%, according to Fair, Isaac & Co.

Further, over half of respondents report that they are reducing current balances on their credit cards (54.8%) and increasing their income level (51.7%). The first step, reducing how much you owe, accounts for about 30% of your credit score. Unfortunately, your current income is simply not a part of your credit score, and raising your income will not directly affect your score.

I think this study is important because it reveals what many Americans don’t know about their credit. The major credit repositories refuse to provide free credit scores, so most consumers learn their scores from lenders when they go through the pre-qualification process. The good news is that credit scores are directly reflective of the information contained in the credit report.

Anyone can order a free copy of their credit report at www.annualcreditreport.com or by contacting the individual credit agencies. Georgia residents are entitled to two free reports from each agency annually.