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Ever wondered why you’ve been turned down for a new purchase or a loan? Credit ratings seem to be a mystery to most people, as many don’t know their rights, how lenders make their decisions, how credit scores are calculated and how they can be challenged and improved.

The contents of your personal credit report can have a bearing on whether or not you are given credit. Factors other than the information held on a credit report may contribute to a lending decision as well (such as the information you provide on your application form), but your credit report is important.

You have the right to view the information contained in your credit report to make sure it is accurate. If errors are found, you are entitled to apply to have them corrected. Having the ability to view and challenge your credit report is important, as; in addition to providing the basis for a lending decision, your credit rating may also affect the interest rate you are offered by lenders, which could lead to more costly borrowing.

Credit reports are compiled by credit reference agencies using information from two main sources:

1. The Public Record: e.g. electoral roll information, court judgments, individual voluntary arrangements and bankruptcies.
2. Information provided by lenders and financial institutions: e.g. credit accounts, credit applications and financial associations.

When you apply for a loan, the lender will typically contact a credit reference agency to check the information on your credit report, in order to help them calculate your potential creditworthiness and risk. These calculations are done by the lender and may vary between lenders. It is important to note that the credit reference agency does not offer any comment or advice and does not know how the information a lender has seen will affect the lending decision.