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Mortgage payment holidays have been a vital lifeline

Mortgage payment holidays have proved a vital lifeline for homeowners struggling financially due to the COVID-19 crisis, according to online mortgage broker Trussle.

However, following the Financial Conduct Authority’s (FCA) statement that mortgage payment holidays will not extend past 31 October, and further financial supports after that point will affect borrowers’ credit files, Trussle has urged homeowners to use caution with this support system.

Miles Robinson, head of mortgages at Trussle, said: “It’s clear that mortgage payment holidays have proved a vital lifeline for some homeowners who have suffered financially as a result of the coronavirus pandemic.

“It’s important to know that unlike before, if you need financial support from your lender after 31 October, it will be marked on your credit file.

“We’d urge homeowners to only utilise the mortgage payment holiday if it’s essential.”

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Robinson also highlighted that once a homeowner’s mortgage payment holiday reaches its end, their monthly payments will increase as a result of additional interest being added to the total mortgage balance.

Meanwhile some lenders offer other viable alternatives; this includes switching some of the loan amount to interest-only payments in the short-term.

Miles Robinson, head of mortgages at Trussle, said: “For existing homeowners, now could also be a good time to think about remortgaging.

“Our customers save £334 on average per month by remortgaging onto a fixed rate, so it is worth using a remortgage calculator to see if switching could save you money.

“Any aspiring or existing homeowners who are considering taking a mortgage payment holiday should seek professional advice as soon as possible to discuss their options.”

By Jake Carter

Source: Mortgage Introducer

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FCA announces extension of mortgage holidays

The Financial Conduct Authority (FCA) has confirmed the extension of mortgage holidays for consumers who still face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current FCA mortgage guidance ends.

The FCA has published additional guidance for firms meaning they must offer further short and longer-term support reflecting the circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage.

Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. This additional guidance will come into force on 16 September 2020.

Christopher Woolard, interim chief executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.

“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”

Under the guidance published today, firms will prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties.

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The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions. The FCA will be monitoring firms to ensure borrowers are treated fairly having regard to their individual circumstances.

The FCA has said that firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.

Where borrowers have taken, or are taking, payment deferrals under the existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes. This also applies to borrowers newly affected by coronavirus who receive support from their lender after 31 October.

This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.

The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date.

The June guidance is due to expire on 31 October and the FCA do not intend to extend this guidance. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October.

However, the watchdog has said it will keep the guidance under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic.

Source: Scottish Housing News

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Stamp duty freeze leads to ‘busiest’ week for mortgage searches

The week following the stamp duty holiday announcement has been the busiest for mortgage searches all year, according to mortgage technology provider Twenty7Tec.

Yesterday (Tuesday 14 July) experienced the greatest number of searches in the year to date, highlighting how much of an impact the chancellor’s announcement to cut stamp duty has made on the market.

There was also a flurry of activity in the buy-to-let sector which had not been experienced since February. Twenty7Tec reported this week has been the busiest for buy-to-let searches, according to its platform’s data.

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Today marks exactly one week since chancellor Rishi Sunak announced he was freezing stamp duty on properties worth up to £500,000 until March 2021.

Phil Bailey, Sales Director at Twenty7Tec said: “Since the stamp duty announcement last week, the market has really hit its stride.

“The last seven days have been the busiest for mortgage searches all year and we’re handling increased volumes of searches each day. Yesterday was the busiest day of the year, closely followed by the day before. Yesterday’s residential mortgage searches were triple the volumes in lockdown.

“Buy-to-let has definitely pushed on and the past few days have been the busiest since the first couple of weeks in February.

“Our sense is that buy-to-let will increase further as the products are there for that part of the market and the risk profile of buy-to-let is still attractive to lenders.”

By Kate Saines

Source: Mortgage Finance Gazette

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Borrowing is on the way to returning to healthy levels

Despite Bank of England figures that showed mortgage approvals hit a record low of 9,300 in May, there are signs that borrowing is returning to normal levels, according to Hometrack.

The Bank of England’s Money and Credit Report showed that households repaid more loans than they took out in May, but that there was still a small increase in mortgage borrowing.

On net, households borrowed an additional £1.2bn secured on their homes, higher than £0.0bn in April, but weak compared to an average of £4.1bn in the six months to February 2020.

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David Ross, managing director of Hometrack, said: “The data released by the Bank of England is encouraging and shows that borrowing, while not at pre-COVID levels, is certainly returning.

“On a more positive note our data for June shows continued growth and is up on the same period in 2019.”

For the market to return to normal, Ross added, providers must continue to innovate and focus on the customer.

He said: “Continued stimulus is key to maintaining this growth.

“We urge mortgage providers to focus on delivering the very best customer experience, removing complexity through digitisation and ensuring fewer barriers to borrowing.

“This in turn will help grow new lending, helping the economy get back on its feet after the shock of COVID.”

By Jessica Bird

Source: Mortgage Introducer

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Homeowners set to be able to extend mortgage payment holidays

Those struggling to pay their mortgage due to coronavirus are set to be able to extend their payment holidays for three more months, or start making reduced payments, in proposals published today.

On 17 March, banks agreed with the Chancellor that they would offer ‘forbearance’ (tolerance and help) on mortgages, meaning they all should offer those struggling a three-month ‘holiday’, allowing customers a temporary break from having to make mortgage payments during this time.

Over 1.8 million mortgage payment holidays were taken up, and the first of these will be ending in June. But an extension of another three months will now likely be available.

The Financial Conduct Authority’s (FCA’s) new draft guidance also includes an extension of the application period for an initial mortgage holiday until 31 October 2020, so that customers who haven’t had a payment holiday and are experiencing financial difficulty will be able to ask for one.

The current ban on repossessions of homes will be continued until 31 October as well.

Full info on what the FCA expects mortgage lenders to do?

At the moment, these proposals aren’t confirmed. The FCA says it welcomes comments on them until 5pm on Tuesday 26 May, and then expects to confirm them shortly afterwards. Here’s what it’s proposing:

  • If you’ve not had a mortgage payment holiday, you’ll have until 31 October 2020 to apply. Customers who are making repayments now but get into financial difficulty later will be able to request a payment holiday until 31 October.
  • If your payment holiday’s ending, you can ask for another three months if you’re still struggling. Lenders should continue to support customers who have already had a payment holiday where they need further help, unless granting a further mortgage holiday would create its own financial difficulties.
  • Firms are expected to contact customers on mortgage payment holidays and find out what they can repay and, for those who remain in temporary financial difficulty, offer further support. As part of this, firms should consider a further three-month payment holiday.
  • If you can make full or partial payments, you should do so. At the end of a payment holiday, firms should find out if customers can resume payments, or part payments. If so, your lender should contact you to agree a plan on how the missed payments will be repaid, which could include spreading the cost of payments over the remaining mortgage term, or extending the mortgage term.
  • The current ban on repossessions of homes will be continued until 31 October 2020.
  • Payment holidays and partial payment holidays won’t go down as a missed payment on your credit file. However, the FCA says that consumers should remember that credit files aren’t the only source of information that lenders can use to assess how creditworthy someone is.

The FCA adds that these recommendations are minimum standards and that they don’t stop firms from going above and beyond, for example, by offering reduced interest.

Buy-to-let mortgages aren’t technically covered by today’s announcement as they’re not regulated by the FCA. Yet if a lender is regulated for its residential mortgage business, the FCA says it also looks carefully at how these firms carry out their unregulated buy-to-let business, so it’s hoped that some mortgage lenders will offer the extensions to their landlord customers too.

What impact could a mortgage holiday have on my credit score?

As Martin and the FCA have pointed out, while mortgage payment holidays won’t be marked as missed payments on your credit report, they could still have an impact on your wider creditworthiness, as lenders can find out about them through bank statements or ‘Open Banking’ data, and can factor them in. As Martin says…

‘We wait to see how substantial the impact will be – but those who need a mortgage holiday should still do it’

The FCA has confirmed, sadly, that while credit files shouldn’t be impacted by mortgage or other payment holidays, lenders are still allowed to take them into account when making their acceptance decisions.

It’s impossible to say yet how widespread this will be or how substantial the impact will be – we’ll start to learn that over the next year. Each lender’s assessment process is different; it’s a dark art that’s hidden from the public and never published, so this is likely to be yet another factor applicants will need to navigate.

Certainly many new challenger financial firms talk about their new, more sophisticated customer assessment models, that they believe are better than just relying on credit files. It’s that very fact that sparked me to look at this in the first place. And as they will be able to see that someone has temporarily not paid their mortgage, they can spot payment holidays.

My hope is that as these holidays are specifically for the short-term financial hit of coronavirus – and as the practice is so widespread – it won’t be used by many firms, and where it is it won’t tarnish individuals’ credit reputation for too long. But there’s no real way to know.

Most importantly, I don’t believe this should stop anyone who needs a mortgage holiday from getting one – if it’s crucial for cash flow, just do it. Yet for those on the border, who may find it temporarily useful but can cope without it, add this to the fact that interest racks up during the payment holiday and I’d err on the side of caution.

What does the FCA say?

Christopher Woolard, FCA interim chief executive, said: “Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to restart mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a mortgage payment holiday will also continue to be able to apply until 31 October.”

By Callum Mason

Source: Money Saving Expert

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Government to extend mortgage payment holidays

Mortgage payment holidays are likely to be extended past June, according to a report in the Financial Times.

Chancellor Rishi Sunak is said to be in discussions with the banking sector about an extension.

Salman Haqqi, personal finance expert at money.co.uk, said “The government’s initial launch of mortgage holidays brought welcome relief for homeowners who had their income affected by the COVID-19 crisis.

“The scheme, where payment could be deferred with zero negative impact to credit ratings, resulted in up to one in nine homeowners making use of the initiative.

“Though a formal announcement is yet to be made, many businesses are still closed and the full extent of job losses is still becoming clear, so any extension to the scheme will be welcomed.”

As it stands more than 1.6 million mortgage customers have taken a payment holiday.

The government’s furlough scheme has already been extended until the end of October.

Haqqi added: “Should homeowners wish to look into a payment holiday on their mortgage, it’s important to remember that you will still owe the money and interest will continue to accrue while the deferred payments remain unpaid.

“This means that your monthly payments will likely go up slightly after the payment holiday ends.

“While the option to take a payment holiday on mortgages will have been a lifeline for many, if you are still able to make your payments in full, you should continue to do so.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Mortgage arrears fall by 6% year-on-year

The mortgage arrears and possessions figures from UK Finance for the first quarter of 2020 show a year-on-year decrease but there was a relatively small rise in arrears compared to Q4 2019.

There were 72,380 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2020, 6% fewer than in the same quarter of the previous year.

Within that total, there were 22,050 homeowner mortgages with more significant arrears (representing 10% or more of the outstanding balance). This was also 6% down on the same quarter last year.

Buy-to-let

The number of buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of this year was 4,420 – again 6% fewer than in the same quarter in 2019.

Within this, 1,170 buy-to-let mortgages had more significant arrears and this was 3% lower than in the same quarter the year before.

Arrears rise on previous quarter

Comparing the Q1 2020 figures to the previous quarter of Q4 2019, homeowner mortgages in arrears rose 2% from 70,880 while buy-to-let arrears increased marginally from 4,390.

This is likely due to the early effects of Covid-19, and the industry has since introduced multiple forbearance measures to reduce financial difficulties for borrowers who are in need of support. The level of arrears remain low by historical comparisons.

Callum Bilbe, analyst, data & research at UK Finance, explained: “While we did see a modest increase in arrears from Q4 2019 to Q1 2020 (the vast majority of which were new arrears in March), this rise relates to the very earliest effects of the Covid-19 outbreak at the start of March, with the payment holiday scheme being introduced shortly after this, helping to prevent further payment issues for borrowers who might be struggling.”

Repossessions

The first quarter of 2020 saw 1,070 homeowner mortgaged properties taken into possession, 23% fewer than in the same quarter of the previous year.

Buy-to-let mortgaged properties taken into possession stood at 640 in Q1 2020 this represents a rise of 8% on the same quarter last year.

Second charge mortgage repossession numbers in Q1 2020 fell to 13, according to the Finance & Leasing Association (FLA). This is down from 24 or 45.8% compared to Q1 2019.

Fiona Hoyle, head of consumer and mortgage finance at the FLA, commented: “The rate of second charge repossessions remains very low – just 0.06% in the twelve months to March 2020, and in line with FCA guidance, repossessions have not been taking place during the Coronavirus period.”

Commenting on the UK Finance figures, Jackie Bennett, UK Finance senior advisor, mortgages, commented: “While the number of mortgages in arrears are down 6% year-on-year for both homeowners and landlords, and the number of possessions down 23% for homeowners, lenders know that coronavirus is currently causing financial difficulty for many customers.

“That’s why the banking and finance industry is working hard to support people during this difficult time, including providing more than 1.6 million mortgage payment holidays and introducing a three-month moratorium on any possessions.”

More arrears in the pipeline

Meanwhile, solicitors Parker Bullen has suggested that 1% of borrowers could default on their loans due to redundancies.

Mark Lello, partner at Parker Bullen, said: “We’re concerned that borrowers, brokers and lenders are not acknowledging the elephant in the room. When the government furlough scheme comes to an end, which it inevitably will for all sectors, early indications suggest we could see 1% or more of workers being made redundant.

“With a dearth of new jobs to go to, people who have been used to years of secure employment could find it very hard to find work in the short term. To aid recovery, many businesses will have to adapt and evolve their operating models. This may include closing business premises, having fewer support staff or making roles that have proved non-essential during lockdown redundant.

“We’re therefore advising brokers and lenders to plan for the worst and prepare for defaults that may occur over the coming months.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Rise in mortgage products ’cause for optimism’

The number of mortgage products grew by 5.9 per cent in the past week in a sign the market is starting to recuperate, according to technology provider Mortgage Brain.

The number of products available last week stood at 8,044, marking the second consecutive week the number had risen, and up by 488 from the previous week.

The increase was mostly due to the remortgage sector, where product numbers went up by 5.4 per cent, while home mover products increased by 2 per cent, and buy-to-let products fell by 1.9 per cent.

When compared to pre-pandemic levels, the number of mortgage products is still 6,630 – or 45 per cent – lower than the nine week average to March 16, however.

According to Mortgage Brain the latest increase in numbers reflected lenders returning to the market, increasing their LTVs and relaxing some of their criteria.

Last week Nationwide resumed lending up to 85 per cent to new customers. Specialist lender Hodge followed and lifted restrictions on its mortgages, after announcing interim changes to its lending criteria last month.

Mark Lofthouse, CEO of Mortgage Brain, said the rise in product numbers in the past two weeks was “cause for cautious optimism”.

Describing the recent figures as “encouraging”, Mr Lofthouse added that “we could be at the end of the dramatic week on week reductions”.

Kevin Dunn, director at Furnley House, added: “Last week we thankfully saw the return to the market of some higher loan to value deals from some of the bigger lenders. Hopefully this will have a ripple effect to give other lenders the confidence to return more products to the market too.

“A higher increase in remortgage products makes sense, as often these are easier to complete without having to have a physical valuation.

“There are definitely some green shoots to suggest the market is slowly coming back.”

By Chloe Cheung

Source: FT Adviser

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Do you need mortgage protection insurance?

Your mortgage is likely to be one of the biggest expenses you need to have every month. Even if you were not able to work because of a disease or redundancy, those repayments still must be made, or you may face the risk of losing your home. You can choose from two primary possibilities to protect yourself: you can turn to general income protection insurance (meaning the payments you would get could be spent on anything) or use protection insurance, designed particularly to cover the mortgage payments. People tend to choose the second option often because it is explicitly designed to solve this problem. MPPI, which stands for mortgage payment protection insurance, makes it possible for you to keep on paying off your mortgage, even if you stopped getting a stable income.

Types of MPPI

There are three main types of mortgage payment protection insurance. The difference between them is the range of situations where you will get financial help:

  • Accident and sickness only,
  • Unemployment only,
  • Accident, illness, and unemployment.

The cost of mortgage payment protection insurance

The price of MPPI is not always the same – it may differ accordingly to your age and the level of your mortgage repayments. Apart from that, the number of life circumstances that enable you to get financial help also affects the cost. Therefore, accident and sickness-only or unemployment-only policies are less expensive than the variant that covers both of them.

What is more, your job or the type of employment contract you have can be significant as well. Most insurers classify professions in different risk categories. For instance, it may look like this:

Class 1 – Professionals, administrative staff, managers, secretaries, IT specialists, etc.

Class 2 – Skilled manual workers, shop assistants, florists, etc.

Class 3 – Semi-skilled workers, care workers, teachers, plumbers, etc.

Class 4 – Heavy manual workers, builders, mechanics, etc.

What is more, most insurance companies cater to self-employed people as well. Still, you should always read the small print carefully in order to make sure you are not excluded because of, for instance, being on a fixed-term or casual contract.

Where to get mortgage payment protection insurance

Firstly, you can be provided with MPPI by a mortgage lender, as most of them offer it along with your mortgage application. It is a convenient solution because, in this way, you will cover your premium as an element of your regular mortgage payment. Nonetheless, it is advisable to always shop around for a policy. You need to keep in mind that buying policy via your lender means that you will be under their group policy. For this reason, further switching to your mortgage can be restricted.

The second option is to cooperate with a mortgage broker to arrange the best insurance for you. They are experienced in comparing numerous policies from many different companies to make sure that you will be provided with the best possible option. What is more, before you make your final decision, they will comprehensively explain to you what the differences in each possibility are.

Another solution that you can choose is to use an existing life insurance policy for mortgage protection. It is possible as long as the amount you are insured for is equal or higher than the value of your mortgage. Moreover, it needs to run for the same term. However, you need to remember that it means you are assigning the policy to your lender. As a result, if you die during the term, the life insurance benefits will be given to your lender to pay off the mortgage. If there are any policy benefits left over after that, your dependants will receive them. However, if the whole sum needs to be used to cover the mortgage, your dependants will get no money.

Topping up your mortgage

If it happens that you want to top up your mortgage, you always have to check if your policy is appropriate for its new value. It is possible for you to find a new policy that will cover the whole amount of your mortgage. Apart from that, you can get other insurance that will be associated just with the added amount.

Both of these options should be compared carefully. Sometimes it can be more beneficial to keep your primary mortgage payment protection insurance and then provide yourself with a second one for the top-up value. You should find out what is the cost of resigning from your primary policy and getting a plan for the full value of your new mortgage instead.

When you are getting a new policy, you may be surprised that the premium is higher than the last time you checked. The reason for this is that you are getting older, and age is one of the main factors that affect the premium. But the good news is that if you quit smoking, or if the rates have lowered since the last time you tried to get the cover, it may be possible for you to pay less.

All in all, to make your financial situation better protected, you really should invest in mortgage payment protection insurance. At the same time, it is advisable not to rush in choosing it and familiarise yourself with all the options, or ask a professional broker to help you to make the right decision.

BY JOHN SAUNDERS

Source: London Loves Business

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One in nine UK mortgages now subject to a payment holiday

The number of mortgage payment holidays in place more than tripled in the two weeks between March 25 and April 8, UK Finance said.

More than 1.2 million mortgage payment holidays have been provided to home owners whose finances have been hit by coronavirus, according to a trade association.

This equates to around one in nine (11.2%) mortgages across the UK now being subject to a payment holiday, UK Finance said.

For the average mortgage holder, the payment holiday amounts to £260 per month of suspended interest payments.

For a mortgage where chunks of the capital (the amount borrowed) and interest are normally being repaid, the average payment holiday equates to around £775 of deferred payments each month.

Lenders announced on March 17 that they would support customers facing financial difficulties due to the Covid-19 crisis.

People who are struggling to make their payments, perhaps because they have had a pay cut or their work has temporarily stopped due to Covid-19, can request a mortgage payment holiday of up to three months.

Payment holidays are available to customers who are up-to-date on their mortgage payments. People taking up this option will still owe the money and interest will still accrue.

Home owners applying for a mortgage payment holiday will need to self-certify that their income has been either directly or indirectly impacted by coronavirus.

UK Finance has said firms will make every effort to ensure payment holidays do not negatively impact on credit files.

The number of mortgage payment holidays in place more than tripled in the two weeks between March 25 and April 8, growing from 392,130 to 1,240,680. This is an increase of nearly 850,000 or an average of around 61,000 payment holidays being granted by lenders per day.

Stephen Jones, UK Finance chief executive, said: “Mortgage lenders have been working tirelessly to help home owners get through this challenging period. The industry has pulled out all the stops in recent weeks to give an unprecedented number of customers a payment holiday, and we stand ready to help more over the coming months.

“We understand that the current crisis is having a significant impact on household finances for people across the country. Lenders have a number of options available to help, and payment holidays aren’t always the right solution for everyone. We would therefore encourage any mortgage customers concerned about their financial situation to check with their lender so they can find out more information on the support available and how to apply.”

Robin Fieth, chief executive of the Building Societies Association (BSA), said: “We know that this is a difficult time for many home owners with a mortgage, and building society staff have been working hard to offer individuals the right solution. For almost quarter of a million so far, that has been a three-month payment holiday offering much needed breathing space to families whose household income is under severe pressure during the current crisis.”

UK Finance said telephone lines remain extremely busy so customers who are concerned about making their mortgage payments are advised to look at their lender’s website in the first instance, which will include the latest information on the support available.

Many lenders are offering customers the option to apply for a mortgage payment holiday through an online form on their website.

Lenders are also urging mortgage holders not to cancel their direct debits before a payment holiday has been agreed, as this will be counted as a missed payment and could impact their credit file.

Source: Express & Star