A credit report is a detailed document that shows your history with creditors and has a considerable effect on your future financial abilities. Possessing a ‘good’ credit report is conventional provided that you pay your bills and debt repayments on time. However, skipping a repayment on a bill or debt repayment can cause considerable complications if you intend to acquire credit again in the future. In recent years, the rules have been modified to place a greater emphasis on affirmative history like paying your bills on time, but overwhelmingly, credit reports are used as a means for creditors to evaluate your capabilities to repay a loan by checking for any financial oversights you’ve made in the past. If you have made some financial oversights, how long does this information stay on your credit report? What kinds of financial errors are more drastic than others? This blog will explore these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will list the kind of information that is regularly found on your credit report:
Personal Information for example your name, DOB, address and driver’s licence details
Joint applicant details if you’ve acquired credit jointly with another entity
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been paid
Defaults and other infringements including 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 probably the most meaningful 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 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 loan providers who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be posted on your credit report and will impact your ability to receive credit down the road, so it’s essential to comprehend what constitutes a default on your credit report. If you cannot make a repayment on a debt, your lender has the capability to report your debt to a credit reporting agency who will then record this information on your credit report. However, creditors 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 lending institution must inform you of any intentions in lodging a report prior to doing this. Typically, 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 Remain On My Credit Report
The majority of the time, a credit default will stay 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 consequences are more serious and the default will remain on your credit report for seven years. It is necessary to keep in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, but the status will be updated to reflect that the debt has been repaid. Each time you make an application for a loan, the financial institution will always assess 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 inform you that your application has been rejected founded on 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 the majority of cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be noted on your credit report for five years. Although there are measures to improve your credit rating (for instance paying your bills on schedule), creditors 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 on time, so if you end up with any financial challenges and can’t pay your bills by their due date, get in contact with Bankruptcy Experts Mackay on 1300 795 575 for assistance, or visit their website for more information: www.bankruptcyexpertsmackay.com.au