When you apply for a loan or credit card, lenders want to know that you’ll actually pay them back, and on time. To determine your credit worthiness, they access your credit rating. This rating will influence the financial institution as to whether they will lend you money, how much they will lend you, and sometimes, what interest rate is offered to you.

But who calculates your credit rating, and how do they do it?

Credit Ratings

Your credit rating, or credit score, is calculated by one or more of Australia’s four Credit Reporting Bodies (CRBs). These agencies collect, store, use and disclose personal and credit related information about individuals. Each time you apply for a loan or credit, the credit provider contacts one (or more) of these agencies, with your personal information and the amount of credit you have applied for. The CRB processes this information and then reports your credit rating. The decision to grant credit is at the discretion of the credit provider.

There are three main CRBs in Australia. These are Equifax Australia (formerly known as Veda), Dun and Bradstreet, and Experian. Each of these agencies maintains their own set of credit information, so you will likely have a separate file, and different credit ratings, with each agency.

Credit agencies calculate your credit rating by analysing your credit file at a particular point in time. The information used for this includes:

• Your personal information (such as your age and where you live)
• The type of credit providers you have used (for example, banks or utility companies)
• The amount of credit you have borrowed
• The number of credit applications and enquiries you have made
• Any unpaid or overdue loans or credit
• Any Debt Agreements or personal insolvency agreements relating to bankruptcy.

Depending on the agency’s rating system, your credit rating will be a number between 0 – 1,200 or 0 – 1,000. This number is then assigned a label, either excellent, very good, good, average, or below average. The higher your rating, the more likely you are to have your credit application approved.

How to Find Out Your Credit Rating

It’s a good idea to find out your credit rating, to ensure that the data reported to the CRBs is accurate, and to check that your identity hasn’t been stolen. If you find that you have an unsatisfying rating, you can take the necessary steps to fix your credit rating.

So how exactly do you check your credit rating?

Firstly, it is free to check your credit rating with each of the three CRBs once a year. You will have to provide identification information, but this can be done quickly and easily. A free report will arrive within ten days, however you can receive it sooner if you are willing to pay a fee.

You can request your credit rating from the agencies via phone or online:

Improving your financial information starts with understanding your current finances and looking for ways to improve it.