What is a Credit Rating?

A credit rating is a tool used by a lender to help determine whether you qualify for a particular credit card, loan, or service. Based on information in your credit file, the credit reference agency analyses your information using a complex mathematical model to yield your credit rating.

Most credit ratings estimate the risk a company incurs by lending you money or providing you with a service -- specifically, the likelihood that you'll fail to make payments in the next two to three years. The higher the credit rating, the less risk you represent. Your credit rating is calculated by a mathematical equation that evaluates many types of information found in the credit file.

What Factors Affect a Credit Rating?

Many different formulas are used to calculate a credit rating, but most are based on the following factors, which each credit rating model weighs differently:

Payment history. A record of late payments on your current and past credit accounts will lower your credit rating.

Public records. Matters of public record such as bankruptcies, judgments, and collection items may lower your credit rating.

Amount owed. Owing too much will lower your credit rating, especially if you're approaching your total credit limit.

Length of credit history. In general, a longer credit history is better for a better credit rating..

New accounts. Opening multiple new accounts in a short period of time may lower your credit rating.

Searches. Whenever someone else gets your credit report -- a lender, landlord, or insurer, for example – a search is recorded on your credit report. A large number of recent searches may lower your credit rating.

Accounts in use. The presence of too many open accounts can lower your credit rating, whether you're using the accounts or not.

Want to Know Your Credit Rating?

Purchasing your credit rating will provide you with your current credit rating, important factors in your file and a copy of your Credit Report.