A credit report is an in-depth document that specifies your history with creditors and has a notable effect on your future financial capabilities. Having a ‘good’ credit report is conventional provided that you pay your bills and debt repayments in a timely manner. On the other hand, skipping a repayment on a bill or debt repayment can cause significant complications if you wish to gain credit again in the future. In recent times, the rules have been adjusted to place a greater focus on favourable history like paying your bills on time, but overwhelmingly, credit reports are utilised as a means for creditors to examine your abilities to repay a loan by checking for any financial errors you’ve made before. If you have made some financial oversights, how long does this information stay on your credit report? What types of financial mistakes are more serious than others? This blog will investigate these questions to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will list the type of information that is normally found on your credit report:
Personal Information for instance your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another person
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been repaid
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 perhaps the most significant component 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 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 lending institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be noted on your credit report and will have an effect on your ability to attain credit down the road, so it’s vital to recognise what constitutes a default on your credit report. If you fail to make a repayment on a debt, your lending institution has the ability to report your debt to a credit reporting agency who will then document this information on your credit report. However, financial institutions 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 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 financial institution must inform you of any intents in lodging a report before doing this. Frequently, your contract or service agreement will stipulate 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 five years, however if a financial institution cannot contact you because you’ve changed your phone number and address (also known as ‘clearout’), the consequences are more extreme and the default will remain on your credit report for seven years. It is very important to bear in mind that even when you do pay an overdue debt, the default will still stay on your credit report, however the status will be updated to show that the debt has been settled. Any time you make an application for a loan, the creditor will always examine your credit report first and if there are any defaults, the lending institution can reject such loan applications. If this is the case, the lender must advise you that your application has been rejected founded on your bad credit report.
As you can see, credit reports are very serious documents that can drastically impact your borrowing capacity and financial flexibility. Most of the time, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be detailed on your credit report for five years. Even though there are measures to improve your credit rating (such as 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 find yourself with any financial complications and can’t pay your bills by their due date, speak to Bankruptcy Experts Coffs Harbour on 1300 795 575 for assistance, or visit their website for more information: www.bankruptcyexpertscoffsharbour.com.au