By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 4/21/2010 7:04:31 PM ET 2010-04-21T23:04:31

When was the last time you checked your credit report? According to a recent survey by Credit.com, about half the people with a credit report have never seen it or had not looked at it for more than a year.

"And that's very disturbing,” says Adam Levin, the site’s chairman and co-founder. He believes the credit report is one of the cornerstones of financial literacy. “In order to be a responsible consumer of credit, you need a knowledge base.”

Your credit report helps you understand where you fit into the credit system. Without this information, you may be rejected when you apply for credit or pay more for that money.

By regularly checking your credit report, you can look for unusual activity and spot identity theft more quickly.

Levin has five ways for better managing your credit. He shared those tips with me.

Tip 1: Only use a fraction of your available credit
The more of your credit you are utilizing, the more nervous some of your creditors get. So try to keep your utilization below 10 percent of your available credit. Ten to 35 percent is neutral, above 35 percent gets you into negative territory and under 10 percent is perfect.

Question: So you’re telling me we shouldn’t get near the credit limits we see on our credit card statements?

Answer: If you get near the limit, only do so briefly. Flirt with it and then run away from it as quickly as possible because the longer you stay near that limit, the more negatively you could impact your credit score.

Tip 2: Use online banking tools to keep a close eye on your account
This is very important for a variety of reasons. First, because it could be an early warning sign that you are an identity theft victim, and second, it brings you face to face with the reality of your spending. Are you getting too close to the credit limit on any credit card account or too close to zero in your bank account? Many current issuers and banks have e-mail and other types of alerts to keep you on track. Take advantage of those alerts and stay alert.

Tip 3: Open credit card mail
Open every single piece of mail you receive about your credit card and read it, especially the fine print. Don’t assume it’s junk mail. When a bank or credit card company makes a change to your account, they must tell you in advance. It’s critical to be aware of those changes because it could cost you money if you don’t know about them, and you could be giving up some of your rights.

Tip 4: Manage your credit portfolio like an investment portfolio
The better credit risk you are considered, the less interest you will pay when you borrow money. If you’re paying less, that’s more money available for whatever you want in life as well as an investment. So you need to manage it. You need to be your own professional portfolio manager when it comes to your credit.

Tip 5: Remember that credit seeps into every layer of your life
Credit is everywhere you turn, whether you buy a house or car, apply for education loans or rent a car. In one way or another, all of these things are impacted by credit. Your insurance rates are impacted by your credit report.

Q: Just to make sure we’re clear: Even though you might be accepted for a loan or credit cards, the higher the interest rate you’ll pay if you don’t have a stellar credit history and high credit score?

A: There is no question that your score is the determining factor for what you will pay. The higher your score, the more you are looked at as a solid credit consumer, which means you are going to pay less in interest or in the case of insurance, less in premiums.

Q: Do potential employers look at your credit history before they hire you?

A: Potential employers do look at your credit history. They can look at it before you get hired and they can look at it after you get hired, as long as you give them the consent to do so. They can’t use your credit score as a determining factor, but they can look at your credit report as one of the elements that go into their decision to hire you.

There are some lawmakers and a number of states that are considering a ban on credit reports as a part of the employment process because so many people have suffered negative things on their credit because they’ve been laid off due to the economic environment, not anything they’ve done. So to allow a credit report to play any role in your hiring would essentially allow the economic environment to torpedo you when you are already a victim.

ConsumerMan tip: There is only one place to get your free yearly credit report. It’s AnnualCreditReport.com, the site set up by the federal government. Using this site, you can get a free report (no strings attached) every 12 months from Experian, TransUnion and Equifax.

At other sites offering so-called “free” credit reports, you may be automatically enrolled in some form of membership program. That’s why they want your credit card number — to bill you. At AnnualCreditReport.com, you are not asked for a credit card number.

If for any reason you are required to give this information in order to get your free report, you are on the wrong site. Get off and try again.

For more information go to FTC Free Credit Reports.

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