A credit report is an in-depth document that specifies your history with creditors and has a considerable effect on your future financial abilities. Possessing a ‘good’ credit report is conventional as long as you pay your bills and debt repayments in a timely manner. However, missing a repayment on a bill or debt repayment can cause substantial issues if you wish to acquire credit again down the road. Recently, the rules have been remodelled to place a greater emphasis on positive history like paying your bills on schedule, but overwhelmingly, credit reports are used as a way for creditors to ascertain your abilities to repay a loan by looking for any financial mistakes you’ve made previously. If you have made some financial oversights, how long does this information stay on your credit report? What types of financial mistakes are more notable than others? This article will examine these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will itemise the type of information that is commonly found on your credit report:
Personal Information for instance your name, DOB, driver’s licence details and address
Joint applicant details if you’ve acquired credit jointly with another entity
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been settled
Defaults and other infringements for instance 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 perhaps the most crucial component of your credit report. It covers all credit accounts such as 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 financial institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be noted on your credit report and will impair your potential to attain credit in the future, so it’s very important to recognise 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 record this information on your credit report. Having said that, financial 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 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 creditor must inform you of any intents in lodging a report prior to doing this. Usually, 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
In most cases, a credit default will remain on your credit report for 5 years, however if a lender cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the penalties are more serious and the default will remain on your credit report for 7 years. It’s important to note that even when you do repay an overdue debt, the default will still stay on your credit report, but the status will be updated to show that the debt has been settled. Any time you apply for a loan, the lender will always assess 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 based upon your bad credit report.
As you can see, credit reports are very serious documents that can considerably impact your borrowing capability and financial flexibility. The majority of the time, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be detailed on your credit report for five years. While there are measures to improve your credit rating (for instance paying your bills in a timely manner), 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 schedule, so if you find yourself with any financial issues and can’t pay your bills by their due date, talk to Bankruptcy Experts Geraldton on 1300 795 575 for assistance, or visit their website for more information: www.bankruptcyexpertsgeraldton.com.au