A credit report is a specific document that details your history with creditors and has a major effect on your future financial abilities. Having a ‘good’ credit report is common as long as you pay your bills and debt repayments on schedule. Having said that, overlooking a repayment on a bill or debt repayment can cause considerable problems if you intend to acquire credit again in the future. Not long ago, the rules have been remodelled to place a greater significance on favourable history such as paying your bills on time, but overwhelmingly, credit reports are used as a way for creditors to determine your capabilities to repay a loan by looking for any financial errors you’ve made in the past. If you have made some financial oversights, how long does this information stay on your credit report? What kinds of financial mistakes are more notable than others? This blog will investigate these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will itemise the kind of information that is generally 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 individual
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
Defaults and other infringements including missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps the most important component of your credit report. It covers all credit accounts like home loans, car loans, personal loans and credit card loans. Any missed repayments will include information such as the due date, paid date, amount, and any partial 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 report1
Credit Report Defaults
Defaults with lenders will be specified on your credit report and will impair your capacity to obtain credit down the road, so it’s vital to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your lending institution has the ability to report your debt to a credit reporting agency who will then record this information on your credit report. With that being said, lending institutions can only do this if the following prerequisites apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which means the lender cannot contact you because you have changed your contact number and address;
The debt is equal to or more than 60 days 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 advise you of any intentions in lodging a report prior to doing this. Frequently, 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 most cases, a credit default will remain on your credit report for 5 years, although if a lender cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the consequences are more extreme and the default will stay on your credit report for seven years. It is essential to note that even when you do pay an overdue debt, the default will nevertheless stay on your credit report, but the status will be updated to reflect that the debt has been paid. Whenever you apply for a loan, the loan provider will always look at your credit report first and if there are any defaults, the creditor can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based upon your poor credit history.
As you can see, credit reports are serious documents that can notably impact your borrowing capacity and financial flexibility. Most of the time, credit reports are either a pass or a fail, so any default, despite how big or small, will be noted on your credit report for five years. While there are measures to improve your credit rating (for example paying your bills on schedule), loan providers are really only interested in any defaults on your credit report and can reject a loan application based upon a single default. If anything, this article highlights the importance of paying your bills and debt repayments on time, so if you end up with any financial difficulties and can’t pay your bills by their due date, call Bankruptcy Experts Parramatta on 1300 795 575 for help, or visit their website for more details: www.bankruptcyexpertsparramatta.com.au