Kitchens by Riland

Credit rating as an activity refers to using statistical calculation to rate the creditworthiness of an individual or a company. It takes into account the nature of all credits that an individual has and the payment behavior shown by him/her towards them. It is calculated by the Credit Rating Agencies (CRAs) which are thereafter sold to banks and other financial institutions as a component of a credit report. Such lending institutions need this credit score so as to understand the probability that the individual will repay back the credit provided by them.

Credit rating agencies and process varies from country to country. In case of Australia, credit rating is universally accepted as the primary way that an applicant to a loan is assessed. The two main Credit Rating agencies of the country are those of Veda Advantage and Dun and Bradstreet.

Credit rating in Australia gives rise to three types of information. These are:

* Consumer Credit Information

* Commercial Credit Information

* Public Record Information

While consumer credit information refers to all the details regarding the various loans that the individual has applied to including the current standing he/she has with them, if any case of default, etc, Commercial credit information relates to more or less the same information but in cases where the individual has taken credit for business purposes, as a trader or a business entity. Public information record on the other hand includes information on court judgments, notices served, bankruptcy details, etc if any.

In Australia, credit rating is done using the logistic (non-linear) probability statistical modeling. It is the most common technique used in developing the credit scorecards. Various newer methods have also been introduced in credit rating. Examples of such powerful methods are those of the non-parametric regression analysis techniques of MARS and CART. Similar to regression analysis but in the decision tree approach, the CHAID technique is also used as well as the random forest tool involving many decision trees.. These are known to be very powerful methods but the logistic method is still the most popular.

Credit reports in Australia are generally provided free of charge to the concerned individual and to other parties like the various credit providers, other credit rating agencies, insurers, utility providers such as telecommunication firms or law enforcement authority if required.