Even if you've never made a late payment, don't assume your credit is near perfect. In fact, assuming anything about your credit score and credit report is not only foolish - it can also end up costing you a lot of money.

Here's why.

Your credit score (also called a FICO score) is a three-digit number generated by a mathematical algorithm using information in your credit report. The score runs from 300 to 850, the higher the better. The number is based on many factors - including how much money you owe, whether you've ever been late on payments, defaulted on loans, and more. Lenders use this credit ranking to determine the risk of lending you money.

For example, if you are applying for a credit card, hoping to get a good financing deal on a car purchase, or buying a home and need a mortgage, lenders will check your credit score before they decide how much they are willing to lend you and at what interest rate. So it's important to make sure the information on your credit report - which is used to come up with your credit score - is accurate.

However even if you think your credit history is perfect, that may not be the case. Unfortunately mistakes happen and there can be erroneous information about missed payments you actually made and other credit-busting inaccuracies on your credit report. A case in point: one common mistake that shows up on credit reports is information about a credit card that was closed by a consumer who didn't want to use it anymore and paid off the account. However, if this fact is listed incorrectly and shows that a credit card company closed the account instead of the consumer, a credit rating can take a nosedive. In addition, things you may think are of little importance - like late credit card payments made way back in your college days - can lower your credit score.

The solution? Take control of your credit by first getting a copy of your credit report, doing what you can to correct any mistakes, and finding out how to improve or rectify any credit or payment problems you've experienced in the past in order to raise your credit score.

How to Get Your Credit Report

There are three nationwide consumer reporting companies: Equifax, Experian, and TransUnion. Thanks to the Fair And Accurate Credit Transactions Act (FACT), each credit reporting company is required to provide you with a free copy of your credit report every 12 months. However, you have to specifically request these reports. The Federal Trade Commission (FTC) has information available on its web site (www.ftc.gov/bcp/edu/microsites/freereports/index.shtml) to help you research your credit report rights.

Important facts about obtaining annual credit reports:

• You can order the reports online at annualcreditreport.com (the only authorized source for the free annual credit reports that you are entitled to by law). Requests are typically processed and mailed to you within 15 days of receipt.
• You can also call 1-877-322-8228 to order an Annual Credit Report Request Form. You will be asked for proof of your identity when you order by phone, including social security number, address, date of birth, and information that only you know (such as the amount of your month house mortgage payment).
• Scam alert: the FTC advises consumers who order their free annual credit reports online to link to annualcreditreport.com from the FTC's website to avoid being misdirected to other websites that offer supposedly free reports but try to trick people into paying fees. The FTC emphasizes that consumers are not required to make any purchase to receive their free annual credit reports.
• If you need copies of your credit reports more than once a year, you can buy them from the three credit reporting companies. Contact them directly for prices and purchasing information:
  - Equifax: 1-800-685-1111; equifax.com
  - Experian: 1-888-397-3742; experian.com
  - TransUnion: 1-800-916-8800; transunion.com

What's in your credit report?

Once you have copies of all three credit reports, you may notice they aren't identical. The FTC explains that's because nationwide consumer reporting companies get their information from different sources .

In general, your credit reports will list the following:

• Personal Information used for identification:Your name, address, Social Security number, date of birth and where you are employed.
• Trade lines: These include information on your credit accounts such as the type of account (credit card, auto loan, mortgage), when you opened the account and your credit limit or loan amount. Current account balances and your payment history are also listed.
• Credit inquiries: Every time you apply for a loan, you are allowing a lender to access your credit report and these inquiries, going back two years, appear on your credit report. The report lists both "voluntary" inquiries, resulting from your own requests for credit, and "involuntary" inquires, such as when a lender orders a report before sending you a pre-approved credit offer in the mail.
• Public records and collection data: Credit reporting agencies gather public record information from state and county courts (including bankruptcies, foreclosures, lawsuits, liens and judgments) as well as information on overdue debts from collection agencies.

Your credit report will notcontain your credit score. To get your exact number, you have to purchase it from a score provider, such as myFICO.com or one of the reporting agencies.

What to do about errors on your credit report

Under the Fair Credit Reporting Act (FCRA), the consumer reporting company and the information provider (which includes the person, business, or organization that gave information about you to a consumer reporting company) are both responsible for correcting inaccurate information in your report.

However, it's up to you to take charge of the situation and contact the consumer reporting company and the information provider about any problems you find or information you question. For example, if a credit report is showing you missed payments on a credit card and you actually paid it on time, you need to contact both the credit card company and the credit reporting company.

Tell the consumer reporting company, in writing, what information you believe is inaccurate, and why. Also contact the creditor (such as a bank or credit card company) or other information provider in writing that you dispute an item and why.

Under federal law, the consumer reporting companies are required to investigate any items in question, usually within a month. They are also required to forward all the relevant information you supply about the inaccuracy you've found to the organization that originally provided the information. When an information provider finds that the disputed information is, in fact, wrong, it must notify all three consumer reporting companies and they should quickly correct the information in your report.

How will you know the outcome? After the investigation is completed, the consumer reporting company must give you the written results and a free copy of your report if the dispute has resulted in a change. (This additional report does not count as a free report under the FACT Act, by the way).

If an item on your original credit report is changed or deleted, the consumer reporting company cannot put any disputed information back in your file unless the information provider agrees that it is accurate and complete. What's more, the consumer reporting company is required to send you notice in writing that includes the name, address and phone number of the information provider.

Of course, there are times when the consumer reporting company or information provider says you are wrong about the facts you are disputing. What do you do then? A good strategy is to ask that a statement of the dispute be included in your file and in future reports. In addition, request that the consumer reporting company provides your statement to anyone who received a copy of your report in the recent past. (You will usually be charge a fee for this service.)

The bottom line on negative information on your credit report

Even if you've made some serious mistakes managing your money and credit in the past, that doesn't mean you are forever doomed to a low credit score. A consumer reporting company can report most accurate negative information for only seven years and bankruptcy information for no more than 10 years.

You can also talk to your financial advisor at your bank, your accountant or other finance professional to discuss the best strategies for paying down debt and working to bring your finances - and credit - back up to the healthiest level possible. In addition, the FTC offers information online that can help you rebuild and improve your credit step-by-step: www.consumer.ftc.gov/articles/0058-credit-repair-how-help-yourself