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Isn't it bizarre that something that's so crucial to our financial credibility can be kept from us? The most important information that exists about your financial worthiness, your ability to obtain loans, mortgages or credit cards, even to get a job, is never disclosed to you.

Have you ever asked yourself why? We sometimes hear banks and credit card companies mutter this phrase 'the credit score', (as distinct from credit report or credit history) but if you ask them for more information on how it's calculated, there's much finger wagging, teeth sucking and head shaking.

In reality, it's very easy to get a copy of your statutory credit report free online these days, but the more critical process of deciding how each company views your history and your current financial responsibility is strictly hush-hush. What's also not clear is what other information credit reference agencies hold on us.

The 'credit score' is a points system where a lender will go through your most personal statistics, including your credit history and mark each of them with a score. In practice this is obviously computerised. If you own your home, and you're registered on the voters roll, these will give you positive points, being young, self-employed and living with your parents less so, or so we think.

The lending companies don't want you to know how they rate your circumstances, because if it were public information, those trying to obtain credit fraudulently would be able to skew their credit applications and manipulate the system. The way an individual lender's 'credit scoring' system works also shines a light deep into the strategy of their underwriting process, and they wouldn't want their competitors to know that.

It used to be that your credit score would be used to give a "yes" or "no" to credit applications, but nowadays, it's the basis of so called 'risk based pricing'. This means that if a lender offers you credit, they set the price to you by way of the fees and the interest rate, which could be quite different to your next door neighbour for the same financial product.

Clearly some would argue that this is fair, why should those with a poor bill paying habits have their credit subsidised by those who always pay, and pay promptly? Also, its good news if lenders and card issuers lend responsibly to people who can afford to pay the money back and understand the implications of borrowing. However, these genuine justifications are sometimes used to suppress criticism of the system.

The problem is because this process is shrouded in obscurity, none of us know the total extent of the information the credit reference agencies and lenders hold about us, how they use it, or their criteria for who they sell it to. Add in the fact that credit scoring is basically down to an individual lender's secret process, and the public are in the dark as to what exactly they need to do to improve their credit ratings.

We all like to go out into the market and compare credit cards, but if we don't know how an individual credit card company may view our circumstances, how do we know how we'll be judged by their 'risk based pricing?

We know that as well as the obvious things like credit card payment history, the main consumer credit reporting agencies now collect information from mobile phone operators, healthcare providers and utility companies. There has been rumour that the agencies also collect information on our shopping habits, marital issues, education history, and sex lives. Clearly the credit card companies and banks pass information on our payment habits back to the credit reference agencies.

So, I guess all we can ask for is some clarity. These systems and processes have such a dramatic affect on our daily lives, and yet we aren't free to examine them or to debate their relevance or correctness.

The author Peter Robinson, is a writer about personal finance and he specialises in credit cards. Peter runs a news feed and independent credit card information website called Cardchoices where you can compare credit cards and apply online for instant approval.

On Peter's site you can review the best Overseas Credit Cards that have reduced charges for overseas transactions.

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