A credit report is a detailed document that records your history with creditors and has a major effect on your future financial capabilities. Having a ‘good’ credit report is standard as long as you pay your bills and debt repayments punctually. However, overlooking a repayment on a bill or debt repayment can cause substantial issues if you plan to gain credit again down the road. Not long ago, the rules have been remodelled to place a greater focus on positive history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a way for creditors to assess your abilities to repay a loan by checking for any financial oversights you’ve made before. If you have made some financial errors, how long does this information remain on your credit report? What types of financial errors are more severe than others? This blog will delve into these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will detail the type of information that is traditionally found on your credit report:
Personal Information including your name, DOB, driver’s licence details and address
Joint applicant details if you’ve acquired credit jointly with another person
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
Defaults and other infringements for instance missed minimum credit card repayments and loan repayments which are more than 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most critical factor of your credit report. It covers all credit accounts such as home loans, car loans, personal loans and credit card loans. Any missed repayments will feature information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications including any business or commercial loan applications
Report requests which lists all the lenders who have previously requested a copy of your credit report
Credit Report Defaults
Defaults with lenders will be noted on your credit report and will have an effect on your ability to receive credit down the road, so it’s significant to recognise what constitutes a default on your credit report. If you cannot make a payment on a debt, your loan provider has the ability to report your debt to a credit reporting agency who will then record this information on your credit report. However, loan providers can only do this if the following prerequisites apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which implies the lender cannot contact you because you have changed your telephone number and address;
The debt is 60 days or more overdue; and
The lender has asked you to pay the debt by either sending you written notice in the mail, or by asking you over the phone1
Your creditor must inform you of any intentions in lodging a report before doing this. Often, your contract or service agreement will outline when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
In the majority of cases, a credit default will remain on your credit report for 5 years, however if a creditor cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the consequences are more severe and the default will remain on your credit report for seven years. It is necessary to keep in mind that even when you do pay an overdue debt, the default will continue to stay on your credit report, but the status will be updated to show that the debt has been paid. Whenever you apply for a loan, the lending institution will always examine your credit report first and if there are any defaults, the lender can reject such loan applications. If this is the case, the lender must notify you that your application has been rejected founded on your poor credit report.
As you can see, credit reports are serious documents that can notably impact your borrowing capacity and financial flexibility. In most cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be recorded on your credit report for five years. Although there are measures to improve your credit rating (for instance paying your bills in a timely manner), financial institutions are really only interested in any defaults on your credit report and can reject a loan application based on a single default. If anything, this article highlights the importance of paying your bills and debt repayments on time, so if you find yourself with any financial issues and can’t pay your bills by their due date, speak with Bankruptcy Experts Dubbo on 1300 795 575 for support, or visit their website for more information: http://www.bankruptcyexpertsdubbo.com.au