In life's school of personal finance, everyone receives a report card. A good grade on your credit report opens the doors of opportunity to home and auto loans and credit cards. Flunk and you still might find a way to get a loan, but chances are you'll pay more than someone who has good credit.

Making the wrong decisions about your credit, like failing to make monthly payments or making them late, can affect your credit for years, which makes buying a car or qualifying for a mortgage that much more difficult.

"The idea is to take care of any problems that arise before they grow into bigger ones," explained Gene Shabinaw, vice president of lending for California Coast Credit Union. "It's important that consumers know where they stand credit-wise when making any major financial move."

Checking your credit report annually and making sure there are no blemishes or errors helps reduce the risk of being rejected for loans, mortgages and credit cards, and is a practical way of maintaining a healthy credit rating. Steps can be taken to rebuild damaged credit and clean up the tarnished credit report, but it all begins with obtaining a copy of your credit report and giving it a careful review.

Getting a copy of your credit report is relatively easy and can be accomplished by contacting each of the three major national credit bureaus. These reports typically cost about $10 apiece, depending upon the state in which they are ordered, but some financial institutions, like California Coast Credit Union, offer special credit-related programs that discount the report cost significantly. The credit union's balance program, for example, provides members with a licensed and trained financial counselor who will personally request and review their credit report with them and offer constructive advice. This free program has been arranged with an outside professional company for the benefit of California Coast members and is completely confidential. Credit reports cost only $5 each under this program.

Credit reports can be obtained through the national credit bureaus by calling, writing or ordering online. In all cases, consumers must include their name, being sure to specify whether it's a Jr. or Sr., if appropriate; date of birth, current and former addresses, Social Security number, spouse's name if applicable, and phone number.

Once the report has been obtained, it is important to verify the accuracy of the information provided, particularly personal identity data and the names of creditors. Be sure to review the name, or names, if you are or were married, Social Security number, date of birth, addresses of places you've lived, names of places you've worked, pending accounts or accounts that have been closed. Make certain that nothing on the report has been there longer than is allowed by law, such as bankruptcies, lawsuits, judgments and tax liens. If any of these have been on your report for seven years or longer, consult the credit bureau about having these removed.

If you do find an error, you must instruct the credit bureau to investigate it with the creditor who supplied the data. Under the Fair Credit Reporting Act, creditors are required to correct errors promptly and without damage to your rating, and the bureau will remove errors that a creditor admits to, but it takes time and patience.

According to Ed Mele, collections supervisor for California Coast CU, the standard procedure for correcting mistakes consists of contacting the creditor directly and requesting that a written statement of the error be sent to all three credit bureaus. Consumers should then follow up with all three credit bureaus to guarantee that the creditor has made changes.

Be sure to photocopy all documentation supporting the claim, and then write a letter to each bureau stating the error and including your full name, address, date of birth and Social Security number. By law, these statements must be included with the credit report when anyone makes an inquiry.

If you disagree with the bureau's findings, Mele says you can insert a statement to that effect into your credit report without a charge, which must be included each time a report is sent out. Send the letter certified, and keep a copy of the receipt and the letter. The credit bureaus are required to resolve the issue in a reasonable amount of time, usually in about 30 days. If you should run into a problem there are consumer rights in place to protect you.

Mele says it is important to remember that only the creditor has the ability to make a change on a credit report, despite claims to the contrary. It's also the consumer's responsibility to follow up with the credit bureaus, as well as agencies that keep public records, to make sure errors have been fixed and their records have been updated.

Double-check your credit card rates and annual fees, as some do go up. Know your credit limit, based on your income, amount of current debt and credit history. A good rule of thumb is to never accrue more in credit card balances than you can pay-off within a 90-day period. The more inquiries you have to the credit bureau can have an effect on lowering your credit score.

The best way to improve a low credit score and reduce those blemishes is to start paying your card each month, on time, without charging and adding to the balance. The worst thing you can do, Mele says, is ignore your bills and your debt. Contact your creditor at the first sign of a problem. Work out a plan with your creditor before you go delinquent. The creditor is there to help you work out a plan. Stay in touch each month while your arrangement with the creditor is in place.

The best thing consumers can do to ensure good credit health is pay the balance as soon as possible. If you cannot pay on time, or have a dispute with a creditor, contact the creditor immediately and be sure to put everything in writing.

If you have the misfortune of getting into credit trouble, contact a credit counseling organization to help you develop a plan to get back on track. Bad credit can haunt you for years, so in the long run, it's best to maintain a healthy credit file and avoid developing bad credit habits.

For more information on California Coast Credit Union's financial services, call (877) 495-1600, or visit www.calcoastcu.org.

Barratt is TITLE with Beck, Ellman Heald