There are a number of compass apps in the Windows Phone Store, all of which will point you in roughly the right direction, but Compass Bearing is a cut above the rest. In addition to showing true north and magnetic compass bearing as reported by the phone, it will also show a calculated true north bearing with an independent magnetic declination calculation based on your latitude and longitude. 

In addition the app has a "vision mode" which is an augmented reality mode that overlays a compass on the view from the device's camera. This makes it very easy to determine, approximately, which way is north simply by holding your phone up, and rotating on the spot.

The declination angle is the difference between magnetic north and true north. This angle will vary depending on your location, hence the need for an accurate calculation. In our tests the calculation provided the Compass Bearing app was more accurate than that provided by Windows Phone. In most cases the difference should only be a few degrees, which is unlikely to be a major concern, but there are some cases when a more accurate measurement is desirable.

The default compass mode in Compass Bearing shows a good level of detail, with all 32 compass points, plus the current heading in degrees. Importantly it also provides accuracy information and information about declination (phone and app). The app also offers a number of options for how the declination should be calculated: Offline IGRF11, Offline WMM2010, and Online NOAA IGRF. The latter of these should be the most accurate as it uses a more up to date data set.

It's very important to note that the compass built into most Windows Phone devices is relatively cheap, and relatively inaccurate. Therefore, it's better not to use it as a stand alone navigation tool, but Compass Bearing will give you all the relevant information to make an informed decision.

It's also worth noting that the app's developer has written about an issue that sees some Windows Phone 7.5 devices reporting an incorrect true North (likely due to incorrect declination calculations). It does not seem to have an impact on all devices, but does provide a good reason as to why you might want an independent declination calculation (as provided by Compass Bearing).

Windows Phone Store description:

Shows true north and magnetic compass bearing as reported by the phone. Using your location data the app will also show a calculated true north bearing with independent magnetic declination calculation based on your latitude and longitude. In vision mode you get an augmented reality compass that can be switched between the phone and app true north readings.

Compass Bearing can be downloaded from the Windows Phone Store. A free trial, which is fully functional, is available, with the full app costing £0.79 / $0.99 / €0.99.