A credit report is an in-depth document that specifies your history with creditors and has a considerable effect on your future financial capabilities. Possessing a ‘good’ credit report is basic so long as you pay your bills and debt repayments punctually. On the other hand, overlooking a repayment on a bill or debt repayment can cause considerable problems if you wish to secure credit again in the future. A while ago, the rules have been changed to place a greater focus on desirable history like paying your bills on time, but overwhelmingly, credit reports are used as a means for lenders to examine your abilities to repay a loan by checking for any financial mistakes you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial errors are more serious than others? This post will investigate these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will provide the type of information that is typically found on your credit report:
Personal Information such as your name, address, DOB and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another entity
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been repaid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements such as bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most crucial aspect 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 for instance any business or commercial loan applications
Report requests which lists all the financial 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 impair your capacity to obtain credit in the future, so it’s important to comprehend what constitutes a default on your credit report. If you cannot make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. With that being said, lenders can only do this if the following terms apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which signifies the lender cannot contact you because you have changed your contact 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 financial institution must advise you of any intents in lodging a report before doing so. Typically, your contract or service agreement will state 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 stay on your credit report for five years, however if a lending institution cannot contact you because you’ve changed your contact number and address (known as ‘clearout’), the consequences are more harsh and the default will continue to be on your credit report for 7 years. It is very important to mention that even when you do pay an overdue debt, the default will nonetheless stay on your credit report, but the status will be updated to show that the debt has been repaid. When you make an application 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 on your bad credit report.
As you can see, credit reports are serious documents that can substantially impact your borrowing capability and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be recorded on your credit report for five years. Although there are measures to improve your credit rating (like paying your bills in a timely manner), lending 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 in a timely manner, so if you find yourself with any financial challenges and can’t pay your bills by their due date, call Gold Coast Bankruptcy Centre on 1300 795 575 for assistance, or visit their website for more information: www.goldcoastbankruptcycentre.com.au