Financial experts advise keeping tabs on your credit report to make sure it doesn't contain any errors because your current credit report is what provides lenders the information they need to make decisions about giving you loans or more credit. Inaccurate credit reports mean that you could face tougher lending terms, including paying higher interest rates, or you could be denied credit.

Finding mistakes on a credit report isn't necessarily a rare occurrence. A new report by the Federal Trade Commission (FTC) has found that 20 percent of consumers have found errors on a credit report.

Congress in accordance with the Fair and Accurate Credit Transactions Act mandated the FTC publication examining accuracy and completeness of consumer credit reports. It discovered that one out of five consumers found mistakes on at least one of their three credit reports from Experian, Equifax and TransUnion, the three major credit reporting agencies.

"These are eye-opening numbers for American consumers," said Howard Shelanski, director of the FTC's Bureau of Economics, in a statement. "The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don't, they are potentially putting their pocketbooks at risk."

While the report was the fifth time the agency looked at credit report accuracy, it was the first time it looked at all participants--consumers, lenders/data furnishers, FICO and the national credit reporting agencies--in the credit reporting and scoring process on a national level.

The study polled 1,001 consumers, 26 percent of which found at least one error in a credit report. The study encouraged these participants to dispute the errors through the Fair Credit Reporting Act process. Through this process, one out of five consumers had their error corrected. Four out of five of these disputes resulted in the participant receiving a modified credit report. In 13 percent of the participants, these modifications changed their credit score. While most of the credit score adjustments were small, five percent of consumers had their scores increase to the point where their credit risk would have been deemed less. Had their credit report been accurate, they would've received a lower interest rate on a loan.

The federal Fair Credit Reporting Act works to help consumers know if their credit reports are accurate, and it also works to promote the privacy of information held by credit reporting agencies.

This act stipulates that consumers have the right to request a free credit report from the three national credit reporting agencies once a year, and it allows for additional checks if a company denies a consumer for credit, insurance or employment based on a credit history; if a person unemployed or on welfare; or if a consumer finds errors in their report due to fraud or identity theft.

Under this law, consumers have the right to have an accurate credit report, and both the credit reporting agency and the information provider are responsible for making corrections, should they dispute them.

When a dispute happens, a consumer needs to report the inaccuracy, provide documentation of why the item in question is a mistake and ask to have information corrected or removed. The credit reporting agency will open an investigation and answer the matter within 30 days. They will also forward the data to the information provider, who will also investigate the matter and report back to the credit reporting agency. If information in a report is in fact inaccurate, the information provider will notify all three credit bureaus in order to update the file.

After a dispute, the credit bureau sends the consumer the results, along with a free credit report, if the new information changes the file. If the dispute is rejected, a consumer can have a record of the dispute added to their file.

"Your credit report has information about your finances and your bill-paying history, so it's important to make sure it's accurate," said Charles Harwood, acting director of the FTC's Bureau of Consumer Protection in a statement. "The good news for consumers is that credit reports are free through annualcreditreport.com, and if you find an error, you can work with the credit reporting company to fix it."