A credit report is a comprehensive document that specifies your history with creditors and has a significant effect on your future financial abilities. Having a ‘good’ credit report is conventional so long as you pay your bills and debt repayments on time. However, overlooking a repayment on a bill or debt repayment can cause considerable complications if you plan to receive credit again down the road. In recent years, the rules have been changed to place a greater focus on favourable history like paying your bills on time, but overwhelmingly, credit reports are used as a way for lenders to evaluate your capabilities to repay a loan by looking for any financial errors you’ve made in the past. If you have made some financial oversights, how long does this information stay on your credit report? What types of financial errors are more drastic than others? This post will look at 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 type of information that is traditionally found on your credit report:
Personal Information for instance your name, DOB, address and driver’s licence details
Joint applicant details if you’ve acquired credit jointly with another person
Credit card information
Arrears brought up to date, for example, any overdue or unpaid debts that have since been repaid
Defaults and other infringements including missed minimum credit card repayments and loan repayments which are greater than 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most critical factor 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 partial payments if applicable
Commercial credit applications for example 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 capacity to acquire credit down the road, so it’s significant to recognise what constitutes a default on your credit report. If you cannot make a payment on a debt, your creditor has the capability to report your debt to a credit reporting agency who will then register this information on your credit report. But, lenders can only do this if the following terms apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which implies 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 requested you to pay the debt by either sending you written notice in the mail, or by asking you over the phone1
Your creditor must notify you of any intents in lodging a report before doing this. Typically, 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
In the majority of cases, a credit default will remain on your credit report for 5 years, although if a creditor 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 nevertheless stay on your credit report, but the status will be updated to show that the debt has been paid. Whenever you apply for a loan, the lending institution will always evaluate your credit report first and if there are any defaults, the creditor can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based upon your poor credit history.
As you can see, credit reports are serious documents that can significantly impact your borrowing capacity and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be listed on your credit report for five years. Although 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 schedule, so if you end up with any financial difficulties and can’t pay your bills by their due date, speak with Bankruptcy Experts Shellharbour on 1300 795 575 for assistance, or visit their website for additional information: http://www.bankruptcyexpertsshellharbour.com.au