If you've ever applied for a credit card, a personal loan, or insurance, there's a file about you. This file is known as your credit report. It is chock full of information on where you live, how you pay your bills, and whether you've been sued, arrested, or filed for bankruptcy. Consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses with a legitimate need for it. They use the information to evaluate your applications for credit, insurance, employment, or a lease.

Having a good credit report means it will be easier for you to get loans and lower interest rates. Lower interest rates usually translate into smaller monthly payments.

Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase accurate negative information in your credit report in exchange for a fee. The scam artists who run these ads not only don't deliverthey can't deliver. Only time, a deliberate effort, and a plan to repay your bills will improve your credit as it's detailed in your credit report.

This is why it is critical for you to fully understand how to read your credit report.

Credit reports are much easier to read now than in the past, because years of pressure from consumer advocates and regulators led to significant changes in the credit-reporting industry. The rise of identity theft was a key consideration for lawmakers when Congress wrote the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act. During that process, consumer advocates and others called attention to the growing importance of consumers understanding how the credit system works.

These days, bad marks on your credit report can determine whether you land the job you're applying for, how much you pay for auto and homeowners insurance, and your credit card interest rate, plus whether you have to pay your utility or cell phone company a deposit.

But, despite tougher laws, including free reports for consumers, centralized fraud reporting, and more pressure on creditors to respond to consumers' complaints, the credit-reporting industry is still, to a large degree, a black box, and credit reports are not nearly as clear and understandable as they could be. Consumers still get confused.

You should focus on identifying what's bad on your reports and the information you'll need for planning your repair effort. There are many different styles and formats of credit report, but most of them derive from one of the three super-bureaus that supplied the information being reported. Each of the three main credit bureaus uses a different format, plus each bureau's format varies depending on whether you request the report online or order it by phone or mail.

On top of that, regional credit bureaus, from which mortgage lenders and others often buy reports, use their own unique format to list your credit information. The instructions are organized around identifying the basic information you need for repairing bad credit:

1. Credit name (and type of creditor)
2. Account number
3. Status
4. Lateness patterns

Some of the information, such as your name and address, won't be new to you, but it's useful to know what the credit bureau has listed anyway. Tiny mistakes in any of the most mundane information can affect your credit rating, especially if it means you've been confused with someone else with a similar name.

Also, each credit bureau offers information on its web site on how to read credit reports and how to submit a dispute, and also will mail you that information if you request your report by
mail. When communicating with the credit bureaus, be sure to include the credit report number at the top of your report. Experian calls it the "report number," TransUnion says "file number," and Equifax refers to it as a "confirmation number."