A credit report is a detailed document that specifies your history with creditors and has a notable effect on your future financial capabilities. Possessing a ‘good’ credit report is common so long as you pay your bills and debt repayments on time. However, missing a repayment on a bill or debt repayment can cause considerable problems if you intend to acquire credit again in the future. Recently, the rules have been modified to place a greater importance on favourable history such as paying your bills in a timely manner, but overwhelmingly, credit reports are used as a means for lenders to examine your capabilities to repay a loan by checking for any financial oversights 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 investigate these questions so as 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 regularly found on your credit report:
Personal Information such as 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, such as any overdue or unpaid debts that have since been settled
Defaults and other infringements for example 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 likely the most crucial aspect of your credit report. It covers all credit accounts like home loans, car loans, personal loans and credit card loans. Any missed repayments will contain information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications including any business or commercial loan applications
Report requests which lists all the lending institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be specified on your credit report and will impair your capacity to acquire credit down the road, so it’s significant to understand what constitutes a default on your credit report. If you cannot make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then document this information on your credit report. With that being said, lending institutions can only do this if the following prerequisites apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which suggests 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 asked you to pay the debt by either sending you written notice in the mail, or by asking you over the phone
Your loan provider must inform you of any intentions in lodging a report before doing so. Frequently, your contract or service agreement will state when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
In most cases, a credit default will remain on your credit report for five years, but if a lender cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the consequences are more serious and the default will continue to be on your credit report for 7 years. It is essential to bear in mind that even when you do settle an overdue debt, the default will nonetheless remain on your credit report, but the status will be updated to reflect that the debt has been settled. Any time you apply for a loan, the loan provider will always evaluate your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected founded on your bad credit report.
As you can see, credit reports are very serious documents that can dramatically 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 (for example paying your bills on schedule), lenders 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, call Bankruptcy Experts Lismore on 1300 795 575 for help, or visit their website for more information: www.bankruptcyexpertslismore.com.au