As a no fee loan brokerage, we’re here to provide credit to those who may be turned down by their bank. The most common reason for being turned down for credit is an inadequate credit score. For many people, what this means is a bit of a mystery, and to make matters worse, there are plenty of common misconceptions about credit files out there. Understanding what your credit file is and what it means for you is an important part of managing your own finances as it can make a huge difference to what you’re allowed to borrow in the future, among other things.

What is a credit file?

A credit file is a collection of pieces of information about you. There are three main credit agencies in the UK which hold this information; Experian, Equifax and Call Credit. They’ll each have much the same information, although they may score you slightly differently. Your name, current and previous addresses, whether you have joint finances with anyone else and any credit information will all be stored on file. What they know about you is ‘scored’ and you’re given a number. If you apply for credit at any point, then the lender you enquire with will have a score range in mind. If your score is below this, then they may not lend to you. It’s not just lenders who use a credit file to gauge what you may be like as a customer – banks, mortgage and rental agencies, mobile phone contract providers, utility companies and even potential employers can all use this information to find out more about you.

You can change this score by doing things which look good on your credit file. Being registered on the electoral roll at your current address, not moving home or jobs too frequently and ensuring you pay all credit taken out in full and on time (or even better; early) will all have a positive effect on your file.

Why won’t my bank lend to me?

You may have been refused by your bank due to an unacceptable or ‘incomplete’ credit file. This means that you could have details missing, poor past financial behaviour or no previous credit experience to draw upon at all. If you have not lived in the UK for very long, regardless of your credit score in your previous country of residence, you will have a low credit score. Unfortunately you cannot bring your credit rating with you when you come from overseas so you’ll have to start again and build up a credit score from scratch.

Similarly, if you’ve never taken out any credit in the past then your score will not be ‘good’, as you won’t have had any time to prove that you’re able to manage credit properly. When it comes to credit ratings, you’re guilty until proven innocent, so you must show an ability to manage borrowing properly before you can build up a better score.

Your credit score may have taken a temporary dip due to reasons beyond your immediate control. Even if you have an excellent repayment history, if you’ve moved house and/or job recently, it’s likely that you’ll have dropped a few points. This is because good credit scores also rely on stability; the more settled and ‘in control’ you appear, the better you’ll be regarded.

Learn more about credit scores in our ultimate guide.