“Credit file” (or “credit report”) and “credit score” are terms that are often used fairly interchangeably, as if they represent the same thing. However, while both involve the same data these are two quite different elements in the picture of your financial health and history that available data can create. So, what’s the difference?
What is a credit file
This is essentially a potted history of your financial behaviour with respect to the credit that you’ve had. This information comes from public sources (e.g. the electoral roll) and also from private sources (e.g. data that is shared between lenders). It is collated by credit reference agencies who then put it together into a report that is made available to lenders, mobile phone operators – anyone that you apply for credit with.
What’s in a credit file?
There are three main elements to your credit file: who you are, how you’ve borrowed and what you’ve borrowed.
Who you are. This is personal information about you that confirms your identity. So, for example, this could include name and address, as well as where you are registered to vote.
What you’ve borrowed. This can cover a very wide range of credit, including credit cards and personal loans. Contracts for a mobile phone or internet provision are also included here. Potential lenders will be able to see what your current balances are, the total debt and a list of the credit accounts that you currently have.
How you’ve borrowed. Your payment history is broken down into some detail in your credit file, showing when payments have been made on time and when they haven’t. This will be a crucial part of the decision making process for a new lender, as if you have a history of missing payments on credit cards they might be reluctant to offer you the credit you’re asking for.
Your credit score
There’s a perception that the UK has a universal system of credit scoring but in fact that’s not the case. There are three main credit reference agencies in the UK and each one has its own system of scoring. So, you will have one score with Equifax, for example, and quite a different score with Experian. Each agency has a different top limit – Experian’s is 999, Equifax’s is 700, and Callcredit’s is 710 – but all use the same data to calculate the scores that they produce. It’s your credit file that determines whether you have a bad credit rating or not and a credit score is simply a representation of this.
The information in your credit file is used by each of the individual agencies to calculate the credit score that you get. The higher the score you have, the more likely you are to get credit with a new lender. However, it’s worth bearing in mind that there are no guarantees, especially because lenders use their own scoring systems to rate each potential borrower.
Why do credit providers access a credit file? They are looking to see whether it’s a good idea to give you the credit you’re asking for i.e. how you’ve behaved as a borrowed in the past. A credit file can also be accessed as a way to check identity.
Do credit reference agencies determine your credit score? Yes and no. Credit reference agencies will give you a credit score based on the information in your credit file and their own systems of scoring. However, each one of these is different. More importantly, lenders don’t use the scores that agencies generate when it comes to making lending decisions. They will rate a potential borrower using the information in the credit file but against their own internal scoring systems. So, an ‘Excellent’ score with Equifax may not guarantee you the credit you want with a credit provider using a different scoring system.
Can you change your credit score? Yes. There are a number of ways to improve a credit score (see the video above), such as paying off debt, correcting any mistakes on the file and disconnecting your credit file from an ex-partner who has a bad credit history.
Can you change the information in your credit file? If it’s incorrect then yes. Other than that, no. We are all creating new credit history all the time with the decisions we make with every loan or credit card we have. But it’s not possible to go back and erase bad past decisions.
How much influence does your credit file have? A lot. You can still get bad credit loans and credit cards if you don’t have a great financial history but it tends to be harder and more expensive. The more positive the financial history in your credit file (and consequently the higher your credit score) the easier it will be to get credit.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley