Credit Rating

A credit rating, typically called a credit score in the US, is used to assess a person's creditworthiness, and the likelihood that they will be able to pay debt obligations such as interest payments. The rating is shown on a consumer's credit report.

The credit rating of a consumer is attained from credit information obtained and kept on file by the three major credit rating agencies.

They keep past and current data on consumer’s financial activity in order to calculate a continuous credit rating. Criteria considered includes a consumer's payment history, bankruptcies, late payments, amount of debt compared to the overall credit available, and the period of time in good credit regarding timely payment of bills, etc.

The credit rating also varies as the data stored by each bureau will depend on what information they have received on each consumer's credit history.

A credit rating changes as information is received by the credit bureau. For example, regular full payments made on a debt would likely lead to a rise in a consumer's credit rating. Conversely, data received on a debt default would likely result in a fall in the credit rating.

Credit score ratings range from 300 to about 900, with most falling between 600 and 700. The higher the rating the better as it creates more opportunities for a consumer to attain mortgages and other debt borrowings, and to negotiate the best possible rate. This is because the better the credit report rating the less perceived financial risk a prospective lender is.

Consequently it can be an advantage to get regular copies of your credit report to have up-to-date information on your credit rating scores.