Let's start at the beginning. Your credit report is basically your credit history. The three major credit bureaus write up your report based on information they get about you from companies that gave you credit in the past. Negative information would include late payments on your bills, or worse yet, a foreclosure on a home.

The credit bureaus also generate a score based on the information in your credit report. The credit score, sometimes called a FICO score, ranges from 300 to 850. You want your score to be well above 620; that's a drawing line for creditors. Below that and you'll be paying more interest on car loans, home mortgages, and even insurance premiums.

You may be one of the tens of thousands of Americans who took out a sub-prime or adjustable rate mortgage to buy a home in the past few years. Heads up! You may be in for a shock when your interest rate re-sets. It's possible your new monthly payments will be considerably higher.

These are all good reasons to fix your credit report now. Here's how:

Action #1: Get a copy of your three credit reports. You have to find out what your lenders already know. You have a right to a free copy of each of your three reports once a year. Go to annualcreditreport.com to get them. This site is sponsored by the credit bureaus themselves. Beware: other sites with slightly different names will try to sell you services you probably don't need.

Action #2: Review and remove. Carefully review your credit report for inaccurate information, and go through the process to have it removed from your file. You may also contest negative information.

Action #3: Reduce your debt. Try very hard to reduce the amount of total debt you are currently carrying from credit cards and car loans. Save money wherever you can, and apply that extra cash to paying down your debt. Here's a tip: Don't entirely pay off your credit card balances, though. Potential new lenders like to see a reasonable balance on your cards; it shows that you can handle debt well.

Action #4: Pay your bills on time. Be very careful to avoid "late-pays" from this point forward. Just one delinquent payment can set back your entire credit repair effort.

When should you start fixing your credit report? Right now! It will take a period of months before your actions start to make an impact on your credit score, so don't delay. And if you're thinking about buying a home, allow at least a year to work on your credit report. That will provide enough time to correct mistakes in your report, and establish a good track record for making payments and trimming your debt.