Mortgage lenders, banks and credit card providers are scrutinising credit files more carefully than ever before. Make sure you’re not penalised because of an error.

There are credit reference files on most adults in the UK - around 40 million people - storing a variety of information that lenders and credit companies look at when assessing how good a risk you are. Your file tells them where you have lived in the past, whether or not you’re on the electoral roll (which verifies who you are) and how well you’ve managed credit and loans. The problem is that mistakes can occur, and while the errors themselves may seem relatively minor, the effect on your ability to borrow may be dramatic. That’s why it’s vital that you get any errors corrected – and fast.

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You may not have seen your credit file, but you can guarantee that many different companies will have used it to work out if you’re a good credit risk

If you’re a good credit risk, you’ll have the best chance of getting a mortgage or loan at the lowest interest rate. And it’s your credit file that credit providers (from banks to catalogue companies, mobile phone providers to credit card companies) rely on when working out whether to lend you money and, if so, how much interest they will charge.

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Your credit score affects how much you pay for credit, but lenders are notoriously secretive about how they work it out

Your credit history is a record of how you’ve managed debts in the past, but your credit score isn’t so easy to pin down. It's often a number – between 0 and 1,000 - that reflects how good a risk a particular bank or credit card company thinks you are. The higher the score, the better the risk you are. But credit scoring is a complex – and secretive - business in the UK and most credit providers have their own system to work out how good a credit risk you are.

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