[The following is an excerpt from the upcoming online seminar FICO 850: Achieving Perfect Credit. To sign up for the entire seminar, click here. All seminar participants get a free copy of their credit report and FICO score.]

Truth #1: Credit reporting is a good thing, not a bad thing.
For those of you expecting to get a hellfire and brimstone sermon on the horrors of the credit reporting industry, this may surprise you. Credit reporting is one of the most important economic developments in history. The availability of accurate information about the creditworthiness of individual people and businesses is what makes the U.S. economy the envy of the world. It allows a person who's a good credit risk to get credit at favorable rates while less responsible folks are asked to pay a bit more to compensate for the lender's risk. It's a beautiful meritocracy where you get rewarded over time for being responsible. That's the good news.

Truth #2: Lots of mistakes are made.
The sheer size of the consumer reporting industry is mind-boggling. According to the Philadelphia Federal Reserve, there are more than 1,000 consumer reporting agencies (CRAs) in the country. You're probably most familiar with the three biggest CRAs –- Equifax, Experian, and TransUnion. Two million credit reports are ordered each day and two billion pieces of information are added to these credit files each month. The average consumer's credit report is updated five times a day. Computers or not, when you're handling that much information, mistakes are going to happen. But how bad is it?

Understanding how prevalent errors are depends on who you listen to and what their biases are. We're aware of four studies that have been done, all of which point to either serious errors in credit reports or problematic inconsistencies in credit scoring across the Big 3 CRAs. The overall consumer reporting system is very important to our economy and does far more good than bad, but it's undeniable that serious errors are made pretty regularly.

Truth #3: Nobody is looking out for you. Except you.
What most people don't realize is that there is almost no structure in place to prevent the errors from taking place. The CRAs take some steps to make sure that the data reported to them comes in a standard format, but they still can't prevent properly formatted data that's simply incorrect from being reported.

There is plenty you can do to correct the problems once you find them, as we'll show you throughout the seminar, but little or nothing to prevent errors at the outset. The point is that the only person who can look out for your interests here is... well... you. The government has passed laws that give you the right to correct errors once they are discovered, but no government agency is overseeing the CRAs to ensure accuracy of initially reported data. This leads us nicely into the next Naked Truth...

Truth #4: The laws protect you, not "them."
First, realize that no law has ever been passed that mandates credit reporting. Laws exist to say that the CRAs may do business, not that they must do business. The naked truth here is that nobody is required to report anything about you.

Over the years, a number of laws have been passed that are aimed at protecting you, the consumer. These laws include the Fair Credit Reporting Act (FCRA), the Equal Credit Opportunity Act (ECOA), and the Fair Debt Collection Practices Act (FDCPA). The specific provisions of these laws make the rules on how the credit reporting industry can do business and it puts pressure on "them" and protects you.

We'll be going into greater detail on some of these laws later in the seminar. They provide the tools you need to ensure that your file is accurate and that you are being treated fairly by both your creditors and the CRAs. These tools will help you to boost your score to its highest potential.

Truth #5: Time, time, time is on your side. Yes, it is.
No matter how ugly your credit indiscretions of the past, the laws require that CRAs stop reporting the blemishes after a certain amount of time. For most all remarks, both good and bad, the CRAs are supposed to stop reporting them after seven years. The major exception to the seven-year rule is bankruptcy, which typically stays on the credit report for 10 years. There are a few other "large dollar" transactions that might stay longer than seven or 10 years.

The other way that "time is on your side" has to do with the laws regarding dispute resolution. Both CRAs and creditors have a certain amount of time in which they must investigate and resolve your dispute. If for some reason the CRA or the creditor doesn't resolve the dispute in time, the negative remarks must be taken off your credit file regardless of whether they are true or not. Remember, the burden of proof for these "allegations" is on the people gossiping about you. We'll go into greater detail about these kinds of restrictions later in the seminar.

Truth #6: It's an opt-out world.
You DO know that everyone in the world has your personal information, right? If it wasn't immediately clear by all of the telephone solicitations, junk postal mail, and spam emails that you get, let us break it to you: Everyone knows you. We'd like to be able to say that you're so popular because of your sparkling personality and rapier wit, but it's more likely that everyone just wants to make a buck off you. Unfortunately, the only way to opt out is to understand the rules of the game and make them work for you.

If you want to stop as much of the madness as is humanly possible, then you're in luck. A number of laws, including the recently passed Gramm-Leach-Bliley Act and the Drivers Privacy Protection Act are designed to help you opt out of unwanted solicitations and sharing of your personal information. Later on, we'll show you exactly what you need to do to get off those lists!

*- FICO is a registered trademark of Fair, Issac and Company, Inc. and this seminar is not affiliated with or endorsed by Fair, Issac and Company, Inc.

Special Bonus! -- We hope you've enjoyed this abbreviated sneak peek at the first lesson of our upcoming online seminar -- FICO 850: Achieving Perfect Credit. Please enroll now for the full seminar and as a special bonus we'll give you a FREE copy of your credit report and FICO score from Equifax's Score Power service. That normally costs $12.95. You'll also get the tools you need to raise your credit score, take control over the information being reported about you, and safeguard your privacy. Enroll today! Class starts Jan. 30.