A credit report is a detailed document that records your history with creditors and has a notable effect on your future financial opportunities. Having a ‘good’ credit report is typical provided that you pay your bills and debt repayments punctually. On the other hand, overlooking a repayment on a bill or debt repayment can cause substantial problems if you intend to gain credit again in the future. Recently, the rules have been altered to place a greater emphasis on favourable history like paying your bills in a timely manner, but overwhelmingly, credit reports are used as a way for lenders to determine your abilities to repay a loan by checking for any financial oversights you’ve made previously. If you have made some financial errors, how long does this information remain on your credit report? What kinds of financial mistakes are more drastic 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 provide the type of information that is generally found on your credit report:
Personal Information such as your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another individual
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been paid
Defaults and other infringements for instance 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 likely the most critical 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 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 impact your capability to attain credit down the road, so it’s crucial to understand what constitutes a default on your credit report. If you cannot make a payment 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. But, lenders 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 signifies the lender cannot contact you because you have changed your telephone number and address;
The debt is equal to or more than 60 days overdue; and
The lender has requested you to pay the debt by either sending you written notice in the mail, or by asking you over the phone1
Your loan provider must advise you of any intentions in lodging a report prior to doing so. Normally, your contract or service agreement will detail when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
Most of the time, a credit default will stay on your credit report for 5 years, although 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 seven years. It’s important to note 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 reflect that the debt has been paid. When you make an application for a loan, the lending institution will always inspect your credit report first and if there are any defaults, the lender 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 very serious documents that can notably impact your borrowing capacity 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 noted on your credit report for five years. Although there are measures to improve your credit rating (such as paying your bills on time), financial 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 end up with any financial complications and can’t pay your bills by their due date, speak to Bankruptcy Experts Adelaide on 1300 795 575 for help, or visit their website for more details: http://www.bankruptcyexpertsadelaide.com.au