Most Americans do not understand credit scores, even though those three-digit numbers are the difference between getting approved or being denied for everything from buying a car to buying a home or renting an apartment.

According to a new Consumer Federation of America survey of more than 1,000 Americans, a majority did not understand what credit scores measure, what good and bad scores are, and how scores can be improved.

"Now that credit scores are increasingly used by utilities, insurers, and employers, as well as creditors, it is essential for consumers to learn their score and what it means," said Consumer Federation of America Executive Director Stephen Brobeck. "The cost of not knowing your score and its significance could be not only denial of credit but also difficulty obtaining needed services and even a job."

Most consumers surveyed understood that lenders use credit scores, but only a minority knew that electric utilities (30%), home insurers (47%), and landlords (48%) often use credit scores to decide whether to sell a service and at what price.

Credit scores are calculated from reports kept by major credit agencies, including Experian, Equifax and TransUnion. These agencies track the amount of debt consumers have and whether they pay their bills on time.

The higher a consumer's score, the more likely he or she will qualify for a good interest rate on credit cards and mortgages.

Video: How To Improve Credit Rating

Having a low credit score can cost consumers a lot of money.

The Consumer Federation of America compared mortgage rates for consumers with different FICO scores, which are developed by the Fair Isaac Corp.

On a $150,000, 30-year, fixed-rate mortgage, consumers with FICO scores over 720 would be charged a 5.72% rate with monthly payments of $872, while consumers with scores below 560 would be charged a 9.29% rate with monthly payments of $1,238.

That's an annual difference of $4,392.

Here are some of the survey's findings:

• Only about one-third (34%) correctly understood that credit scores indicate the risk of not repaying a loan, not factors like financial resources to pay back loans or knowledge of consumer credit.
• More than one-half (52%) incorrectly believed that a married couple has a combined credit score.
• Few consumers knew what constitutes a good score. Only 12% correctly identified the low 600s as the level below which they would be denied credit or have to pay a higher, subprime rate. And, only 13% correctly understood that scores above the low 700s usually qualify them for the lowest rates.
• Many consumers did not have a clear idea how to improve their credit score. Two-fifths (40%) did not understand that paying off a large balance on a credit card would improve one's credit score.
• Many who try to learn their credit score in the future will be surprised to learn that there is often a charge. Nearly three-quarters (72%) incorrectly believed that they can obtain their credit score for free once a year.

Under a new federal law that goes into effect Dec. 1, consumers applying for mortgages will be able to obtain their score for free from lenders.

They also will have free access to their credit reports once a year from the major agencies, but there will be a fee for access to scores.

The Consumer Federation of America says there are five key facts that consumers should know about credit scores:

1. Scores reflect only one’s own past credit history, not personal characteristics such as age and gender. Over time, consumers have the ability to control these scores.
2. A low score could not only cost you up to thousands of dollars a year in additional finance charges, but also deny you access to credit, insurance, electric and telephone service, a rental unit, and even a job.
3. Consumers with scores below 600 are typically charged relatively high, subprime loan rates, while those with scores above 700 are usually charged relatively low rates, and those with scores above 760 are charged the lowest rates.
4. The most effective steps one can take to improve one's score are to: Pay your bills consistently and on time. If you have missed payments, get current and stay current. Don’t max-out your credit cards or other "revolving credit." Pay off debt rather than moving it around and don’t open many new accounts rapidly. And, check your credit report to make sure it is error-free.
5. Consumers can purchase credit scores and reports from all three credit bureaus for $38.85 by contacting Fair Isaac, or individual reports and scores from the three bureaus -- TransUnion , Experion, Equifax -- for $9 each.