A credit report is an in-depth document that specifies your history with creditors and has a considerable effect on your future financial abilities. Having a ‘good’ credit report is common provided that you pay your bills and debt repayments on schedule. On the other hand, missing a repayment on a bill or debt repayment can cause significant issues if you plan to secure credit again down the road. In recent times, the rules have been remodelled to place a greater importance on desirable history such as paying your bills on schedule, but overwhelmingly, credit reports are utilised as a means for creditors to determine your capabilities to repay a loan by checking for any financial mistakes you’ve made in the past. If you have made some financial mistakes, how long does this information remain on your credit report? What kinds of financial oversights are more drastic than others? This article will look at these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will list the type of information that is regularly found on your credit report:
Personal Information including your name, address, DOB 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 such as missed minimum credit card repayments and loan repayments which are over 60 days overdue
All credit applications
Debt agreements such as 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 include information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications for instance 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 creditors will be listed on your credit report and will impair your capacity to secure credit down the road, so it’s significant to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then note this information on your credit report. With that being said, creditors 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 asked you to pay the debt by either sending you written notice in the mail, or by asking you over the phone1
Your financial institution must advise you of any intentions in lodging a report before doing so. Generally, your contract or service agreement will detail 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 remain on your credit report for 5 years, although if a loan provider cannot contact you because you’ve changed your telephone number and address (also known as ‘clearout’), the consequences are more harsh and the default will remain on your credit report for seven years. It is very important to mention that even when you do pay an overdue debt, the default will nevertheless stay on your credit report, however the status will be updated to show that the debt has been paid. Any time you make an application for a loan, the lending institution will always examine 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 bad credit history.
As you can see, credit reports are very serious documents that can considerably impact your borrowing capacity and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be posted on your credit report for five years. Even though there are measures to improve your credit rating (for instance paying your bills on time), creditors 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 time, so if you end up with any financial challenges and can’t pay your bills by their due date, speak with Bankruptcy Experts Emerald on 1300 795 575 for help, or visit their website for more information: http://www.bankruptcyexpertsemerald.com.au