If you’ve ever been turned down for a loan you may have heard the words ‘credit rating’ or ‘credit score’. This score is determined to work out how good a candidate you’ll be at repaying what you borrow, otherwise known as your creditworthiness. Most lenders will have their own way of calculating your score, but it will generally be based upon what’s on file in your credit report.

What is on my credit report?

A credit report details all your credit related history for around the past seven years. It lets a lender know if you’ve taken out a loan in the past or set up a payment plan for goods and services used. It also records how you’ve gone at paying back those amounts borrowed. You’ve had one of the following in the past few years it will be on your file:

• mortgage
• loan eg. car, personal, business
• phone or internet plan
• utilities account with a 7 day payment plan
• credit card
• store card

If you’ve defaulted on a payment or have an overdue account this will be included in your credit file. These types of things, as well as having too many active debts, can impact your credit score and, as a result, whether a lender will grant you a line of credit. Generally, a default or overdue account will remain on your file for five years, regardless of whether you have since paid what was owing. You can take a look at your credit report through independent credit reporting agencies. These agencies or bureaus are the ones who collect the information and supply it to lenders. They’ll let you take a look at your file for a small fee. Often these organisations have their own process for working out your credit rating based on your credit history.

Changes to Australian credit reporting

New implementation around credit reporting in Australia will see changes start appearing on credit reports as of March 2014. A few of the important amendments to be aware of include:

• more information around your repayment history will appear on file, including if you’ve had late repayments
• open credit scoring where credit reporting agencies will explain to you how they determined your credit score
• improved processes for dealing with incorrect information on your credit report, if you discover any

While you should try to maintain a good credit score, don’t be discouraged if you have a few late payments in your history. Every lender is different and how they judge your creditworthiness can vary too. Just because you receive one rejection on a loan, doesn’t mean you won’t get approved with another lender.