Is there a difference between a credit score and a credit file?

You hear all the time about the importance of your credit score and how lenders are checking your credit file when you make a loan application. What does that really mean? Is there a difference between a credit score and a credit file? Most of the time these terms seem to be interchangeable, but they are slightly different beasts to understand. If you are in the process of moving away from a cycle of debt and you wish to improve your credit score and apply for credit in the future, it does pay off to get to know the differences between the two and how your actions can impact both in a positive way over the coming months and years.

What is a credit file?

 Your credit file is the history of your personal financial behaviour. It is a report that is continuously updated by the various credit agencies, who will each hold slightly different information on you and come up with a credit score based on the information held within your credit file. The information found in your credit file is available from a variety of both public and private records. So for instance, your credit file will have information about you from the electoral roll, but it will also include data shared between different lenders about how responsible you have been in the past as a borrower.

There are three main aspects of your credit file. The first is the information that proves that you are who you say you are whenever you apply for credit. This is personal information such as your name and address and whether or not you are registered to vote. The second is information relating to all the money you have borrowed in the past and currently owe. This includes personal loans, credit cards, store cards, mobile phone contracts and any overdraft facility you have with your bank. Third, it’ll show how you’ve borrowed and whether you’ve made payments on time or not.

What is a credit score?

All of the information that is included in your credit file by the various credit reference agencies is then used to come up with a credit score. You might find that your score is slightly different between these agencies. This is fine and natural, as each has its own scoring system. A lender will look at each of the agencies to see a clear picture of whether your average credit score demonstrates that you will be likely to pay back credit on time and within the agreed terms put forward.

Your credit score is therefore very important. If you have a bad credit score there is still a chance that you can find a line of credit through responsible lenders offering adverse credit loans and the like, but you should always look to improve your credit score over time. Check your credit file for inaccuracies and make sure that any false information is corrected. Register to vote and whatever credit you do have, pay it back on time, every time. Any blip in the form of missed payments can set you back when it comes to your credit score in the future.

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