When Tom Flammia refinanced his Yonkers, N.Y., home four years ago, he paid off his credit card bill as part of the process. So when his mortgage agent pulled his credit report two years later to refinance again, Flammia was stunned to learn that the charges were still listed as unpaid.

The delinquency mark meant he wouldn't qualify for the low interest rate on the loan.

But having that information before Flammia actually needed to refinance was invaluable. He contacted the company that consolidated his loans and was able to get the returned checks to the credit bureau to fix the mistake.

Flammia's situation illustrates the importance of checking your credit report, particularly if you're in the market for a loan. Having a good credit score is the key to saving thousands of dollars in interest on a loan.

But it has become much more important than just interest rates. It can be a factor in whether or not you get a job or an apartment, since potential landlords and insurance companies and even some employers check them. It's also a good indicator of whether you've been a victim of identity theft.

"My credit score went up and I was able to get a better rate so I saved a considerable amount of money," says Flammia.

Mistakes are common on credit reports.

"Reporting agencies, they process millions of files every day," says Luci Duni, director of consumer education at TrueCredit, which is a subsidiary of the credit bureau TransUnion. "By the sheer volume of information there's bound to be inaccuracies."

For most people, checking your credit report twice a year is sufficient, experts say. Consumers who want to be pre-approved for the real estate market or for another type of large purchase should start checking quarterly about a year before they shop for a mortgage, says Fenton N. Soliz, president of Mortgage Experts Inc. in White Plains, N.Y.

The three major credit bureaus each offer various packages that range from checking your credit report once a year to getting e-mail updates if there has been a significant change in your credit history. They come up with a FICO score, a credit score scale used by many lenders that use a risk-based system to determine the possibility that the borrower may default on financial obligations to the mortgage lender. It ranges from 300 to 850 and 650 and above is considered good.

Experts say it's important to get credit reports from the three bureaus because some companies don't report to all three. Lenders and others who check credit reports take the average of the three FICO scores.

The three companies each offer a 3-in-1 report. It's $29.95 from Equifax and TransUnion, and $34.95 from Experian.

Even if there are no mistakes, information is power.

"It's like looking at a picture of yourself," says Duni. "When people see it they want to act on it. Especially for someone in their 20s, if they haven't always paid their bills on time. By their late 20s when they're ready to buy a house, there's plenty of time to get their credit score above 650 — that's what most lenders are looking for to get a good rate."