A credit report is a detailed document that contains your history with creditors and has a significant effect on your future financial abilities. Having a ‘good’ credit report is standard provided that 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 in the future. A while ago, the rules have been remodelled to place a greater focus on constructive history such as paying your bills in a timely manner, but overwhelmingly, credit reports are utilised as a means for lenders to analyse your abilities to repay a loan by checking for any financial oversights you’ve made before. If you have made some financial errors, how long does this information stay on your credit report? What types of financial mistakes are more notable than others? This article will investigate these questions to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will detail the type of information that is usually found on your credit report:
Personal Information such as your name, DOB, driver’s licence details and address
Joint applicant details if you’ve obtained credit jointly with another person
Credit card information
Arrears brought up to date, such as 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 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 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 include 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 creditors who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be listed on your credit report and will affect your capacity to obtain credit in the future, so it’s crucial to recognise what constitutes a default on your credit report. If you cannot make a repayment on a debt, your lender has the ability to report your debt to a credit reporting agency who will then note this information on your credit report. Having said that, loan providers 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 phone number and address;
The debt is 60 days or more 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 notify you of any intents in lodging a report before doing this. Often, 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 Remain On My Credit Report
In the majority of cases, a credit default will stay on your credit report for five 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 necessary to bear in mind that even when you do settle an overdue debt, the default will nevertheless remain on your credit report, but 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 inspect your credit report first and if there are any defaults, the financial institution can reject such loan applications. If this is the case, the lender must notify you that your application has been rejected founded on your poor credit history.
As you can see, credit reports are serious documents that can greatly impact your borrowing capability and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be shown on your credit report for five years. While there are measures to improve your credit rating (such as paying your bills on time), 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 end up with any financial troubles and can’t pay your bills by their due date, reach out to Bankruptcy Experts Australia on 1300 795 575 for support, or visit their website for more details: www.bankruptcyexpertsaustralia.com.au