A credit report is an in-depth document that contains your history with creditors and has a significant effect on your future financial abilities. Having a ‘good’ credit report is basic as long as you pay your bills and debt repayments punctually. Having said that, overlooking a repayment on a bill or debt repayment can cause serious problems if you intend to obtain credit again down the road. In recent times, the rules have been changed to place a greater emphasis on desirable history such as paying your bills on time, but overwhelmingly, credit reports are used as a means for lenders to determine your abilities to repay a loan by looking for any financial errors 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 mistakes are more notable than others? This article will examine 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 including your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another entity
Credit card information
Arrears brought up to date, for example, 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 more than 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 feature 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 creditors who have previously requested a copy of your credit report
Credit Report Defaults
Defaults with creditors will be mentioned on your credit report and will affect your potential to acquire credit in the future, so it’s necessary to recognise what constitutes a default on your credit report. If you fail to make a repayment on a debt, your creditor has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. With that being said, 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 signifies 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 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 inform you of any intents in lodging a report before doing so. Normally, 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 remain on your credit report for 5 years, however if a lender cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more harsh and the default will stay on your credit report for 7 years. It is essential to keep in mind that even when you do pay an overdue debt, the default will continue to remain 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 lending institution will always examine 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 notify you that your application has been rejected based on your bad credit report.
As you can see, credit reports are serious documents that can greatly impact your borrowing capacity and financial flexibility. In most cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be posted on your credit report for five years. Although there are measures to improve your credit rating (such as 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 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 difficulties and can’t pay your bills by their due date, call Bankruptcy Experts Gosford on 1300 795 575 for support, or visit their website for additional information: http://www.bankruptcyexpertsgosford.com.au