Factor analysis is widely used to evaluate whether questionnaire items can be grouped into clusters representing different dimensions of the construct under study. This review focuses on the appropriate use of factor analysis. The Medical Outcomes Study Short Form-36 (SF-36) is used as an example. Articles were systematically searched and assessed according to a number of criteria for appropriate use and reporting. Twenty-eight studies were identified: exploratory factor analysis was performed in 22 studies, confirmatory factor analysis was performed in five studies and in one study both were performed. Substantial shortcomings were found in the reporting and justification of the methods applied. In 15 of the 23 studies in which exploratory factor analysis was performed, confirmatory factor analysis would have been more appropriate. Cross-validation was rarely performed. Presentation of the results and conclusions was often incomplete. Some of our results are specific for the SF-36, but the finding that both the application and the reporting of factor analysis leaves much room for improvement probably applies to other health status questionnaires as well. Optimal reporting and justification of methods is crucial for correct interpretation of the results and verification of the conclusions. Our list of criteria may be useful for journal editors, reviewers and researchers who have to assess publications in which factor analysis is applied.