A credit report is a specific document that lists your history with creditors and has a major effect on your future financial opportunities. Having a ‘good’ credit report is standard provided that you pay your bills and debt repayments on schedule. However, missing a repayment on a bill or debt repayment can cause serious complications if you intend to gain credit again down the road. In recent times, the rules have been adjusted to place a greater significance on affirmative history such as paying your bills in a timely manner, but overwhelmingly, credit reports are used as a way for creditors to analyse your capabilities to repay a loan by checking for any financial oversights you’ve made previously. If you have made some financial mistakes, how long does this information stay on your credit report? What types of financial errors are more serious than others? This article will look at these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will list the kind of information that is traditionally found on your credit report:
Personal Information including your name, address, DOB 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 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 greater than 60 days overdue
All credit applications
Debt agreements such as bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most important 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 contain information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications for example any business or commercial loan applications
Report requests which lists all the creditors who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be detailed on your credit report and will impair your capacity to receive credit in the future, so it’s important to comprehend what constitutes a default on your credit report. If you fail to make a payment on a debt, your creditor has the ability to report your debt to a credit reporting agency who will then document this information on your credit report. But, lending institutions can only do this if the following prerequisites apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which indicates the lender cannot contact you because you have changed your telephone 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 prior to doing so. Often, 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
Most of the time, a credit default will stay on your credit report for five years, although if a financial institution cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the penalties are more harsh and the default will stay on your credit report for seven years. It is essential to keep in mind 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 apply for a loan, the loan provider 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 bad credit report.
As you can see, credit reports are very serious documents that can significantly impact your borrowing capability and financial flexibility. Most of the time, 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. Whilst there are measures to improve your credit rating (for example 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 schedule, so if you end up with any financial difficulties and can’t pay your bills by their due date, speak with Bankruptcy Experts Alice Springs on 1300 795 575 for assistance, or visit their website for more details: https://www.bankruptcyexpertsalicesprings.com.au