EVER wondered what goes into your credit report score?

Your credit report score is designed to show you, by way of a three-digit number, the strengths and weaknesses of the information in your credit report. It shows you how your credit standing compares with other consumers.

Tersia van Rooyen, consumer education manager at TransUnion South Africa, says credit and service providers use the consumer's credit report information as a tool to develop their own credit risk score. This, along with consumer's employment history, income and affordability assessments, as well as the type of credit applied for, may help determine if they can extend credit and at what interest rate, she says.

Van Rooyen says your credit score is calculated using a complex algorithm that factors in how well you pay your bills on time, each time, how much debt you currently owe to other lenders and how often you have applied for credit recently.

"Essentially, it is a numerical rating of what your credit report says about your management of existing credit," she says.

Van Rooyen says the higher your score, the better. A TransUnion Credit Score, for example, can range from 600 to 999. The consumer can rate as fair, good or very good.

"Your credit score can serve as a guide if you want to apply for credit to buy a home or car, or to apply for an increase in credit," Van Rooyen says.

"A fair score indicates that you have some work to do to look better in the eyes of a lender. It could also indicate that there could be an inaccuracy with the information contained in your credit report," she says.

So, it is important to review your credit report on a regular basis to spot any inaccuracies, which could be the sign of identity theft. If something on your credit report is not accurate, you should dispute it.