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What Exactly Is A Credit File, And How Does it Affect You?

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You may have heard before that your credit file is important and that “you should really check your credit score more often”, but why? What makes your credit score so important, and how does it affect you? We’ll lay it all out for you.

What is a Credit File?

A credit file is made up of all of the credit that you’ve taken out in the last six years. This includes information supplied by banks, building societies and even payday loan direct lenders such as ourselves. It demonstrates whether you’ve paid back your debts on time so that other creditors can decide how risky it is to lend you money.

Everyone has their own individual file, and you can check yours for free at Experian.

What Information Does It Have On It?

A lot of information is held on your credit file: such as your name, date of birth, and current and previous addresses. It also holds information from bank accounts in your name and any loans you’ve agreed to.

This includes:

How Does It Affect You?

By using the above information you are given a credit score. The higher your credit score, the better. Think of a credit score like a test: the more marks you get, the better your chances are of getting what you want. When you have a good credit score, it means judging by your credit history, you have a high probability that you will repay the loan within the stipulated time.

Therefore, if you intend to get a loan at some point, especially from institutions like banks, you need to work towards having a good credit score. A good credit score is, therefore, something that will make lenders trust you that much more.

This can even affect applying for a mortgage and rented property too.

Essential to note is that in most cases, different lenders calculate credit scores on their own. In other words, they make their own calculations. As a result, you might end up having different credit scores for different lenders. Though there are some lenders who offer “no credit check loans“,  it may be better, in the long run, to work on improving your credit score as “no credit check loans” are likely to charge higher interest rates.

The Importance of Your Credit Score

As discussed, a credit score is not the same as a credit rating or history. All three factors have to be considered by lenders assessing an individual’s loan application and suitability for a loan.

Credit companies require information from potential borrowers to determine a credit score and rating.  The credit score is used by lenders when deciding about lending money for all types of loans: from mortgages to payday loans.  From the information provided, criteria are matched and the credit score is determined.

The credit score is an indicator of an individual’s worthiness to qualify for credit.  Lenders use credit scores to apply credit limits and interest rates, whether for a long or short term loan. Lenders are required by the FCA to credit check individuals before they are approved for a loan. Companies offering products like payday loans with no credit check should not be trusted.

Credit History

Loan terms are based on an individual’s credit history.  Part of the information entered within credit applications counts towards their credit history.  Other factors contributing to credit history and affecting an individual’s credit score are: how past financial obligations were managed; how present financial responsibilities are met; and whether there are defaults on loan payments. It can be difficult to obtain money if you have a low credit score and less than perfect credit file, but with PiggyBank you can apply for a loan for bad credit as we consider more than just individual’s credit scores.

Credit reference agencies provide individuals with credit reports detailing their credit score and rating.  The credit reports provide information used to determine the credit score, and these include both financial and non-financial information. When individuals would like to improve their credit score and rating, they may use the credit report to gain details about their credit history.

If you’re looking to build up your credit score, so that you’re more eligible to take out secured loans and unsecured loans, you can follow these tips and tricks to improve your credit score!

Apply Now!