Step 1: Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of any documents that support your position. In addition to providing your complete name and address, your letter should identify each item in your report you dispute; state the facts and the reasons you dispute the information, and ask that it be removed or corrected. You may want to enclose a copy of your report, and circle the items in question. Send your letter by certified mail, "return receipt requested," so you can document that the consumer reporting company received it. Keep copies of your dispute letter and enclosures.
Consumer reporting companies must investigate the items you question within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it is required to investigate, review the relevant information, and report the results back to the consumer reporting company. If this investigation reveals that the disputed information is inaccurate, the information provider has to notify the nationwide consumer reporting companies so they can correct it in your file.

Do-It-Yourself Check-Up

Regardless of your credit history, financial advisors and consumer advocates recommend reviewing your credit report periodically for three important reasons:  

Regardless of your credit history, financial advisors and consumer advocates recommend reviewing your credit report periodically for three important reasons:

1. The information in your credit report affects whether you can get a loan or insurance — and how much you will have to pay for it.

2. It's important to make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.

3. It can help you deter, detect and defend against identity theft. That's when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don't pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.

Source: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm