First and most importantly, the consumer needs to know everything they can about credit reporting agencies (CRA's). CRA's are the national agencies that monitor every consumer's credit purchases, their loan histories, and so on.

Every time you use a credit card, apply for a loan, owe a debt, or miss a payment, a report is generated by that action to one of these agencies. Each agency maintains its own profile of your credit history, personal information, public files, and so on. That information can be requested by banks, landlords, brokers, and any sort of business that wants to find out about you.

There are three major credit agencies in the United States: Equifax, Experian, and Trans Union.

Each agency has differing information about consumers on their records, often resulting in inaccurate or out-of-date information. For example, let's say you were paying off an auto loan, and you closed it in May of 2004. Equifax might note that on its report and mark it down, but Trans Union does not. Therefore, if you apply for a credit card, and the bank contacts Trans Union for your credit report, they might turn you down because you still have an open car loan ... even though you don't.

This is a simplified instance, but don't doubt that things like this do happen. Each credit agency makes the claim that they do not communicate, thus forcing the consumer to personally contact each agency to correct errors or update information.

Trying to deal with a CRA can invoke images of "Brazil" or "1984." Imagine the most impersonal, faceless bureaucracy ever -- impossible to contact, and requiring you to navigate through a labyrinth of scams, false promises, and outright lies.

You can call a CRA via their toll-free number, but they are only open between 9 am and 5 pm in your time zone, thus requiring you to either call them while you're at work, on your lunch break, or force you to take time off to deal with them. You can write them at their public address, but responses can take up to 30 days, not an option if you have an urgent collection notice on your desk.

Most of us would probably contact them via their Web site, but wait! You may end up getting redirected to a "nested" subsidiary site like True Credit or Credit Expert -- they look and sound like the right site, but you may get conned into ordering your credit report for astoundingly expensive fees, and then be unable to dispute any records or get any assistance.

Of the three, Equifax is the only one to offer a direct connection to its site, but in order to get instant customer assistance, I had to suck it up and buy one of their credit reports. Once I did, I magically got access to their member site, including a toll-free 24-7 customer service hotline.

That was the easy part, however. You have to keep a cool head and know all your facts when dealing with CRA customer service representatives. They are generally reading from a script and told what they can and cannot answer, and often try to steer you to buy other CRA-sold products in order to answer your questions. When you flat-out ask for information, more often than not, they'll be unable to tell you. The best thing to do is get your credit report and go over it with a magnifying glass, picking out any discrepancies yourself.

Don't want to deal with one of these vast bureaucracies? You do have options. Many consumer sites and credit-related sites offer "free" credit reports. The most well-known, FreeCreditReport.com, is another subsidiary of Experian, but it actually provides fairly up-to-date credit data, at least from its parent agency.

The federal government has recently provided some new options, thanks to the amended Fair Credit Reporting Act of 2004. One important provision is the right of consumers to access a complete credit report for free once a year. However, this new system is being rolled out region-by-region, so if you live on the East Coast, you will not be able to use it until September 1st, 2005.

Bankrate.com provides a complete state-by-state rundown of where you can get a credit report and what it may cost you. Consumers' Union recommends picking up one report from an agency every three months in order to get the most accurate picture of your credit without paying extraordinary fees.

Next: Reading Your Credit Report -- The Devil's in the Details