A credit report is a specific document that records your history with creditors and has a substantial effect on your future financial abilities. Having a ‘good’ credit report is typical 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 significant issues if you wish to obtain credit again in the future. Recently, the rules have been modified to place a greater emphasis on desirable history like paying your bills in a timely manner, but overwhelmingly, credit reports are utilised as a way for creditors to assess your capabilities to repay a loan by looking for any financial oversights you’ve made in the past. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial oversights are more drastic than others? This article will examine these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will detail the type of information that is normally found on your credit report:
Personal Information for example your name, address, DOB and driver’s licence details
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 settled
Defaults and other infringements for example 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 meaningful 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 contain 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 lenders who have previously requested a copy of your credit report
Credit Report Defaults
Defaults with lenders will be mentioned on your credit report and will affect your ability to secure credit down the road, so it’s paramount to understand what constitutes a default on your credit report. If you fail to make a repayment on a debt, your creditor has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. However, lending institutions can only do this if the following conditions apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which suggests 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 lender must notify you of any intents in lodging a report prior to doing so. Commonly, 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 five years, although if a lender cannot contact you because you’ve changed your telephone number and address (referred to as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for seven years. It is necessary to bear in mind that even when you do repay an overdue debt, the default will nevertheless stay on your credit report, however the status will be updated to reflect that the debt has been settled. Every time you apply for a loan, the financial institution will always examine your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must notify you that your application has been rejected based on your poor credit report.
As you can see, credit reports are very serious documents that can considerably impact your borrowing capacity and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be specified on your credit report for five years. Whilst there are measures to improve your credit rating (for instance paying your bills in a timely manner), lenders 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 complications and can’t pay your bills by their due date, reach out to Bankruptcy Experts Maitland on 1300 795 575 for support, or visit their website for more details: http://www.bankruptcyexpertsmaitland.com.au