A credit report is an in-depth document that specifies your history with creditors and has a notable effect on your future financial capabilities. Having a ‘good’ credit report is regular as long as you pay your bills and debt repayments on time. However, skipping a repayment on a bill or debt repayment can cause substantial issues if you plan to obtain credit again down the road. Recently, the rules have been modified to place a greater emphasis on constructive history such as paying your bills on time, but overwhelmingly, credit reports are utilised as a means for creditors to examine your abilities to repay a loan by checking for any financial errors you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What types 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 Consist of
The following will specify the type of information that is normally 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 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 such as missed minimum credit card repayments and loan repayments which are more than 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most crucial 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 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 lenders who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be specified on your credit report and will impair your capacity to receive credit in the future, so it’s critical to recognise what constitutes a default on your credit report. If you cannot make a repayment 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. With that being said, creditors 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 contact 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 lender must inform you of any intents in lodging a report before doing this. Normally, your contract or service agreement will stipulate 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 remain on your credit report for five years, however if a lender cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the penalties are more serious and the default will remain on your credit report for 7 years. It is necessary to bear in mind that even when you do settle an overdue debt, the default will nevertheless stay on your credit report, but the status will be updated to reflect that the debt has been repaid. Any time you apply for a loan, the lender will always evaluate 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 notify you that your application has been rejected based upon your poor credit report.
As you can see, credit reports are very serious documents that can substantially impact your borrowing capability and financial flexibility. Most of the time, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be listed on your credit report for five years. Whilst there are measures to improve your credit rating (like 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 find yourself with any financial problems and can’t pay your bills by their due date, call Bankruptcy Experts Kalgoorlie on 1300 795 575 for assistance, or visit their website for more details: https://www.bankruptcyexpertskalgoorlie.com.au