What is a credit file?
Having access to credit is important for any business owner, but many entrepreneurs only have a vague understanding of what their credit file looks like and what goes into a credit file check. Financial institutions are partly to blame for this; it sometimes feels as if the processes involved in carrying out a credit file check are deliberately unclear. Unless you work in banking, finance, or a related industry, it probably all seems a bit mysterious.
In this article, we’ll explain exactly what a credit file is, what it contains, and why it’s so important for your business. We’ll also discuss when and why you would want to conduct a credit file check and how you can use them to make better business decisions.
What is my credit file and what’s in it?
A credit file is a portfolio that a financial institution, like a bank or credit reporting bureau, has on you in its database. If you have ever applied for a credit card, personal loan or home loan, or even a gas or electricity account, then you will have a credit file.
Your credit file contains several different kinds of information. First of all, it includes personal data, like your name, address, date of birth, driver’s license, and employment details. Next is your consumer credit information, which covers any credit cards or loans you have applied for, current and previous credit accounts and credit limit, and whether you have made your payments on time or have any defaults registered against your name.
You will also find in your credit file any relevant publicly available information, like court judgements, directorship details, claims for bankruptcy and personal insolvency, and details of any applications or accounts for commercial credit.
Both individuals and business entities can have a credit file, and this will be consulted whenever you apply for credit. Your credit file is hugely important because it is the main source of information that lenders will use to make assessments about your creditworthiness. On the strength of your credit file, they will decide whether or not to extend credit to you.
Is a credit file the same as a credit report?
These terms are often used interchangeably, but there is in fact a difference. Your credit file is the record of all the information mentioned above that makes up your credit history. When a lender is considering extending credit to you, they will approach a credit bureau to request a credit file check.
The credit bureau will use the information from your credit file, often along with data sourced from their own databases, to create a credit report, which is the document they return to the lender. This might seem like a small detail, but it pays to be as precise as possible about these different terms and how they are used.
Make better decisions with a credit file check
If you are a business owner who extends credit to other businesses, such as a wholesale supplier or a property investor, it is best practice to always order a business credit report first. If your prospective customer has a history of payment defaults, bankruptcy, and general financial mismanagement, they are much more likely to default in the future and expose your business to financial hardship.
A company credit report from CreditorWatch takes information from a company’s existing credit file, but it also draws from an extensive and exclusive database available only to CreditorWatch. We capture payment data from our customer base of over 55,000 SMEs, which we then crosscheck to find any discrepancies or suspicious activity.
This unique database allows us to offer SMEs the kind of in-depth credit reports that were previously only available to much larger businesses. Our reports contain a detailed credit history of a business entity, giving you the information you need to make smarter decisions about your business.
To find out more about how a credit file check can protect your business from financial risk, contact our Customer Success Team on 1300 501 312 or contact them at firstname.lastname@example.org.