A credit report is a specific document that records your history with creditors and has a considerable effect on your future financial opportunities. Having a ‘good’ credit report is conventional as long as you pay your bills and debt repayments on schedule. Having said that, skipping a repayment on a bill or debt repayment can cause considerable complications if you wish to gain credit again down the road. In recent years, the rules have been modified to place a greater focus on affirmative history such as paying your bills on time, but overwhelmingly, credit reports are used as a means for creditors to assess your capabilities to repay a loan by checking for any financial oversights you’ve made in the past. If you have made some financial mistakes, how long does this information stay on your credit report? What types of financial mistakes are more severe than others? This blog will delve into 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 type of information that is usually found on your credit report:
Personal Information for instance your name, DOB, driver’s licence details and address
Joint applicant details if you’ve acquired credit jointly with another individual
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been repaid
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 perhaps the most crucial element 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 include information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications for example any business or commercial loan applications
Report requests which lists all the lending institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be listed on your credit report and will alter your ability to acquire credit down the road, so it’s vital to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your financial institution 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 rules 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 equal to or more than 60 days 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 advise you of any intents in lodging a report before doing so. Frequently, your contract or service agreement will state when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
The majority of the time, a credit default will remain on your credit report for five years, although if a creditor cannot contact you because you’ve changed your phone number and address (also known as ‘clearout’), the penalties are more extreme and the default will continue to be on your credit report for 7 years. It is essential to mention that even when you do repay an overdue debt, the default will nevertheless remain on your credit report, however the status will be updated to show that the debt has been paid. Any time you apply for a loan, the lender will always assess 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 advise you that your application has been rejected based on your bad credit report.
As you can see, credit reports are 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, irrespective of how big or small, will be detailed on your credit report for five years. Whilst there are measures to improve your credit rating (for example paying your bills on schedule), loan providers 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 find yourself with any financial troubles and can’t pay your bills by their due date, talk to Bankruptcy Experts Fremantle on 1300 795 575 for assistance, or visit their website for more information: http://www.bankruptcyexpertsfremantle.com.au