A credit report is a detailed document that shows your history with creditors and has a significant effect on your future financial capabilities. Having a ‘good’ credit report is basic provided that you pay your bills and debt repayments on schedule. However, missing a repayment on a bill or debt repayment can cause substantial problems if you wish to receive credit again in the future. A while ago, the rules have been remodelled to place a greater focus on constructive history like paying your bills on schedule, but overwhelmingly, credit reports are used as a way for lenders to examine your abilities to repay a loan by looking for any financial errors you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What kinds of financial mistakes are more serious than others? This post will investigate these questions to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will itemise the type of information that is typically found on your credit report:
Personal Information for instance your name, DOB, address and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another person
Credit card information
Arrears brought up to date, for example, any overdue or unpaid debts that have since been paid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are over 60 days overdue
All credit applications
Debt agreements such as bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most crucial element 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 such as 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 creditors will be shown on your credit report and will alter your capacity to receive credit in the future, so it’s essential to understand what constitutes a default on your credit report. If you cannot make a payment on a debt, your lender has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. Having said that, lenders 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 implies the lender cannot contact you because you have changed your phone 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 intentions in lodging a report before doing so. Usually, your contract or service agreement will describe when a default can be made and reported to a credit reporting agency.
How Long Does A Default Remain On My Credit Report
For the most parts, a credit default will remain on your credit report for 5 years, however if a financial institution cannot contact you because you’ve changed your phone number and address (referred to as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for 7 years. It’s important to note that even when you do settle an overdue debt, the default will continue to remain on your credit report, however the status will be updated to show that the debt has been repaid. When you apply for a loan, the lender will always evaluate your credit report first and if there are any defaults, the financial institution can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based on your poor credit report.
As you can see, credit reports are serious documents that can substantially 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 recorded on your credit report for five years. Even though there are measures to improve your credit rating (like paying your bills on time), lending institutions 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 schedule, so if you find yourself with any financial difficulties and can’t pay your bills by their due date, talk to Bankruptcy Experts Sunshine Coast on 1300 795 575 for assistance, or visit their website for more information: www.bankruptcyexpertssunshinecoast.com.au