We’ve all seen those incredibly catchy FreeCreditReport.com jingles, but what should you do with your report when you get it?

Firstly, we commend you on taking an active approach to monitoring your credit. Like a proud father, we’re weeping uncontrollably.

Besides, whether or not you’re actually contemplating using that credit to purchase something big does not matter. With identity theft and fraud lurking, you can never be too proactive with these things.

According to federal law, you are entitled to one free credit report per year. However, that yearly report will only contain your credit history listing. This is just a list of all the purchases you made on credit.

What you really want is a report with your credit score on it and you’ll have to pay a small fee to get that. Bummer, I know, but this is how they get you. It’s a small price to pay for this information though.

And although I mentioned freecreditreport.com with their wacky and not-that-hilarious ads, your best bet is a site like ‘annualcreditreport.com’. According to an article on credit reports from mainstreet.com:

The three most popular companies that run credit reports—Equifax, Experian, and TransUnion—each use their own methods to determine credit scores. As a result, if you request reports from three different credit bureaus, you’ll likely end up with three different credit scores.

Freecreditreport uses Experian as their main provider, but Annualcreditreport will supply you with each of the three credit bureau reports.

A credit report is compromised of five factors weighted in order of importance that calculate your ‘credit score’:

1. your payment history (35 percent)
2. total amounts owed (30 percent)
3. length of your credit history (15 percent)
4. types of credit (10 percent)
5. how much new credit you’ve established (10 percent)

Contrary to popular belief, requesting your credit report does not affect your credit score. There are worry warts out there who are too afraid to check up on their credit reports for some strange fear that it will just make it all worse.

Hard calls‘ on your credit report do hurt your credit score. These are requests for credit like applying for a mortgage, a car loan, or any other type of loan. But you should be pretty sure of what you’re doing if you go through the process of applying for one of these.

When you examine your newly acquired report, be vigilant of any strange purchases or ‘hard calls‘ you might not be aware of. Just last year someone was able to purchase a house in New Brunswick, New Jersey using deceased Nirvana frontman, Kurt Cobain’s social security number. So be on the lookout, something like this could happen to you while you’re still alive.

Since credit scores are used to determine interest rates, it’s important that you set yourself up for the highest score you can attain. Here are a few simple tips to improving your score:

  1. Pay Your Bills On Time – this should be the most obvious one. Your score will improve dramatically if you pay on time each month.
  2. Correct Mistakes – if a card company claimed you made a late payment, and that’s false, you need to fix that. Pronto. It can take months to correct these mistakes so be sure to handle them prior to applying for anything important.
  3. Chill With Those Extra Accounts – some guy at the bar is giving away free t-shirts if you sign up for a credit card? Don’t do it, man! That ‘No Fat Chicks’ shirt may look cool now, but you’ll pay for it later with a crappy credit score. Also, try to keep your bank accounts open and build a trust with you credit cards. The longer your average account life, the lower your score.
  4. Stop Playing The Minimum Balance Game – the best scenario would be to pay off everything in full each month, but that may be difficult to do. Don’t combine credit cards into one lump payment, but rather keep making the payments on the separate cards. Consolidation doesn’t wipe out the amount of outstanding debt, but instead just reduces your overall credit limit.

MainStreet: Get and Understand Your Credit Report