A credit report is a comprehensive document that contains your history with creditors and has a notable effect on your future financial opportunities. Possessing a ‘good’ credit report is regular so long as you pay your bills and debt repayments in a timely manner. Having said that, missing a repayment on a bill or debt repayment can cause serious problems if you plan to obtain credit again down the road. A while ago, the rules have been modified to place a greater emphasis on affirmative history like paying your bills on time, but overwhelmingly, credit reports are used as a means for lenders to ascertain your capabilities to repay a loan by checking for any financial mistakes you’ve made in the past. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial errors are more drastic than others? This article will investigate these questions 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 normally found on your credit report:
Personal Information including 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 instance, any overdue or unpaid debts that have since been paid
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 like bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most meaningful factor 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 for instance 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 mentioned on your credit report and will affect your ability to acquire credit down the road, so it’s paramount to recognise what constitutes a default on your credit report. If you fail to make a payment on a debt, your creditor has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. However, creditors 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 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 loan provider must advise you of any intentions in lodging a report before doing this. Usually, your contract or service agreement will outline when a default can be made and reported to a credit reporting agency.
How Long Does A Default Remain On My Credit Report
The majority of the time, a credit default will remain on your credit report for five years, but if a lending institution cannot contact you because you’ve changed your phone number and address (also known as ‘clearout’), the penalties are more severe and the default will remain on your credit report for seven years. It is necessary to mention that even when you do repay an overdue debt, the default will nonetheless stay on your credit report, however the status will be updated to reflect that the debt has been paid. Each 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 lender 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 report.
As you can see, credit reports are very serious documents that can substantially impact your borrowing capacity and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be shown on your credit report for five years. Although there are measures to improve your credit rating (such as paying your bills in a timely manner), financial institutions 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 in a timely manner, so if you find yourself with any financial complications and can’t pay your bills by their due date, talk with Bankruptcy Experts Rockingham on 1300 795 575 for help, or visit their website for additional information: http://www.bankruptcyexpertsrockingham.com.au