A credit report is a specific document that details your history with creditors and has a significant effect on your future financial capabilities. Possessing a ‘good’ credit report is conventional as long as you pay your bills and debt repayments on time. Having said that, skipping a repayment on a bill or debt repayment can cause considerable problems if you intend to secure credit again down the road. In recent times, the rules have been altered to place a greater significance on favourable history like paying your bills in a timely manner, but overwhelmingly, credit reports are used as a means for lenders to ascertain your abilities to repay a loan by checking for any financial mistakes you’ve made previously. If you have made some financial mistakes, how long does this information remain on your credit report? What kinds of financial errors are more severe than others? This blog will examine these questions so as 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 usually found on your credit report:
Personal Information for example your name, address, DOB and driver’s licence details
Joint applicant details if you’ve received credit jointly with another entity
Credit card information
Arrears brought up to date, for example, any overdue or unpaid debts that have since been settled
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most meaningful 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 partial 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 shown on your credit report and will have an effect on your capability to acquire credit in the future, so it’s necessary to understand what constitutes a default on your credit report. If you fail to make a repayment on a debt, your lender has the capability to report your debt to a credit reporting agency who will then document this information on your credit report. Having said that, lending institutions can only do this if the following prerequisites apply:
The default amount is equal to or more than $150;
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 equal to or more than 60 days 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 phone.
Your financial institution must inform you of any intents in lodging a report prior to 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 five years, however if a financial institution cannot contact you because you’ve changed your contact number and address (known as ‘clearout’), the consequences are more serious and the default will remain on your credit report for seven years. It is very important to keep in mind that even when you do repay an overdue debt, the default will continue to stay on your credit report, however the status will be updated to show that the debt has been paid. Every time you make an application for a loan, the financial institution will always examine your credit report first and if there are any defaults, the lending institution can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected founded on your poor credit report.
As you can see, credit reports are serious documents that can dramatically impact your borrowing capability and financial flexibility. The majority of the time, credit reports are either a pass or a fail, so any default, despite how big or small, will be detailed on your credit report for five years. Though there are measures to improve your credit rating (for example paying your bills on time), 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 troubles and can’t pay your bills by their due date, get in contact with Bankruptcy Experts Bundaberg on 1300 795 575 for help, or visit their website for additional information: www.bankruptcyexpertsbundaberg.com.au
Sources:
https://www.moneysmart.gov.au/borrowing-and-credit/borrowing-basics/credit-reports