There are few financial matters more vexing than your credit report. Even those who are financially astute and credit savvy can have difficulty sorting through reports and scores. Unfortunately, the stakes can be high for those who don’t take the time to understand the contents of their report or why they’re so important. So, what is really in a person’s credit report? And, why should anyone care what is in it?

What is a credit report?

Let’s start by explaining what your credit report really is. In simple terms, your credit report is an ongoing record of your cumulative payment history and financial behavior. The three credit reporting agencies, Equifax, Experian and TransUnion, all compile data submitted by creditors and keep detailed records of bills paid and purchases made on credit. The agencies also keep a record of any time that you’ve applied for credit, and the industry refers to these as credit inquiries. In addition to keeping track of financial transactions and credit inquiries, the three agencies also typically keep a record of personal information gathered from applications you may have filled out. According to Equifax, your credit report may also contain public records such as liens, bankruptcies, and overdue child support. Information from your public record may stay on your report for as long as seven years.

Why is your credit report important?

Once your financial transactions and information have been collected, credit reporting agencies use the information in order to grade you based on your credit history. This ranking is commonly referred to as your credit score. Lenders then use this information to determine what level of risk they are taking if they grant you a loan, and this is where the contents of your credit report can begin to impact your life. Having negative information on your credit report can affect you in several ways. First, having bad credit can mean not qualifying for the best financing options or having to pay a higher interest rates or additional deposits. Depending on the severity of negativity on your report, you could even be denied a mortgage, car loan or personal loan altogether.

Bad credit report can even stop you from getting hired for a job for which you’re otherwise qualified.

Monitoring your credit report can help

According to Smart Credit, as many as 42 million consumers have confirmed errors on their credit report. These errors may include small typographical mistakes as well as information incorrectly reported by lenders. In addition to errors, fraudulent and unauthorized credit card activity is on the rise. You may be putting yourself at risk if you’re not consistently keeping an eye on your credit report and its contents. If you do find an error on your report, it’s important to address it as soon as possible in order to expedite a resolution. The Fair Credit Reporting Actallows you to formally dispute any errors with the three credit reporting agencies. Start by sending a certified letter outlining your complaint to the agency on whose report you found the error. After a report is filed, the agency has 30 days to respond to your dispute in writing. If the information is found to be erroneous, the creditor that provided the false information must inform the credit reporting agencies to correct the error.

In addition to monitoring your credit report for errors, there are steps that you can take in order to actually improve your finances. First up? Get your free credit score from WisePiggy.com. FICO, the most popular credit-scoring company, compiled data from the U.S. credit bureaus in order to determine common characteristics of those whose scores are especially high. Those with the highest scores kept their credit card balances low compared with their available credit. They also paid all of their bills on time. In fact, 96 percent of them showed no missed payments on their credit report. People with high credit scores also kept accounts open longer than average, resulting in long credit histories.