• LoanCaddie

Credit Score vs Credit File: What’s the difference?

Understanding the credit world can be very difficult especially if this is your first time. Words like credit score, credit file and credit history can often confuse people.

Before we start with the differences, credit history is sometimes referred to as a ‘credit report‘ and a credit rating is sometimes referred to as ‘credit score’. Both of these are then submitted to your credit file.

Throughout your life, if you have applied for or used credit, then you are likely to have a credit report and a credit score. This is particularly for banks to determine how good or bad your credit rating is and whether you could handle repaying a loan.

So, now that we’ve covered the basics and if you’re still with me, we are going to go into a bit more detail on what’s the difference.

Credit Score / Credit Rating

A credit score is a point system which summarises your credit file to show banks and lenders how reliable you are to lend a loan to. This basically provides a snapshot of your ‘creditworthiness’ and it is calculated by using the information in your credit file / credit history.

There are many different factors that make up your overall credit score and each of the four credit reporting agencies in Australia have a different system in calculating your score and use different value ranges. For example, with Equifax the range is between 0 – 1200. The higher your credit score is, it is more likely for your application to be approved.

Your credit score is calculated by assessing five factors and these are:

  • Payment history (whether you make payments on time)

  • Amounts owed (how much you owe across all your credit accounts)

  • Length of credit history (The ages of your oldest credit account, your newest account and the average age of all of them)

  • Credit mix (having a combination of different types of credit accounts can boost your score)

  • New credit (opening several lines of credit within a short period of time can hurt your number)

Your credit score will be determined by all your financial and personal information on your credit report. Credit score bands are usually measured between 1-1,000 or 1-2,000. Equifax is Australia’s frontrunner in credit reporting. It has credit information for more than 18 million Australians and is used by a majority of lenders and credit providers.

Here are their credit score bands to give you an idea of the scale:

  • Excellent (833 – 1,200): You’re highly unlikely to have any adverse events arise to harm your credit rating over the next 12 months.

  • Very Good (726 – 832): You are unlikely to have an adverse event arise in the next 12 months.

  • Good (622 – 725): You are less likely to have an adverse event in the next 12 months.

  • Average (510 – 621): You are likely to have an adverse event arise in the next 12 months.

  • Below Average (0 – 509): You are more likely to have an adverse event in the next.

You can improve your credit score by limiting how many loans you apply for and avoid making any defaults on your repayments and monitor your credit file to ensure you are not a victim of identity fraud. You should gain a copy of your credit file and make sure you’ve fixed any errors or remove any incorrect information from your file. You should also pay off any outstanding bills and keep on top of any repayments you currently have.

You can also contact a credit repair company to help remove any incorrect information or clarify your details from your credit report.

Credit file

The term credit file is often used interchangeably with the term ‘credit report’ or ‘credit history’, but it is important to note that these are different. Your credit file is a raw version of your credit report. Ultimately, when a credit reporting agency receives your information from a lender, this is then ‘filed’ under your name.

Your credit file contains information that reflects your history with credit and service providers. It is updated with details such as:

  • Your personal details such as full name, date of birth, driver’s licence, gender and residential addresses and employer information are all on file.

  • Every time you make a credit application (credit cards, personal loans, mortgages, etc.) This includes any loans you’ve agreed to be a guarantor for.

  • Details of any joint applications you have made with someone else.

  • Loans or debts that are in default, repaid or settled will be available on your credit file and it will show the lender you applied to, the type of finance and the amount and date.

  • Any time you’ve made a debt agreement with your creditors, it will show up on your credit file.

  • Commercial and business loan applications.

This file is created and stored by one or more of the four credit reporting agencies in Australia and they are:

  • Dun & Bradstreet

  • Equifax (previously known as Veda Advantage)

  • Experian

  • Tasmanian Collection Service

Each time you make a credit application, the lender or service provider will notify a credit reporting agency of your application. The notification of your application will include the date, the amount of credit and your personal details.

Your personal details are kept on your file permanently however all other details have expiry dates ranging from two years up to seven years. Also know that you may have a credit file with one, some or all of the Australian credit reporting agencies, and that your credit file will most likely vary between agencies because a lender or service provider may not send your information to every agency when you place a credit application.

How can I check my credit file and credit score?

According to the Office of the Australian Information Commissioner a credit reporting body must give you access to your consumer credit report for free once every 12 months.

You can also request a free copy if:

  • You have been refused credit within the past 90 days, or

  • Your credit-related personal information has been corrected

At other times a credit reporting body may charge a fee, but it must not be excessive.

You can request a copy of your credit report from these credit reporting bodies:

  • Equifax, phone 138 332.

  • Experian, phone 1300 783 684.

  • illion, phone 1300 734 806.