A credit report is a specific document that specifies your history with creditors and has a notable effect on your future financial abilities. Possessing a ‘good’ credit report is conventional so long as you pay your bills and debt repayments on time. On the other hand, skipping a repayment on a bill or debt repayment can cause serious complications if you need to gain credit again down the road. Recently, the rules have been changed to place a greater significance on desirable history like paying your bills on time, but overwhelmingly, credit reports are utilised as a way for creditors to analyse your capabilities to repay a loan by checking for any financial errors you’ve made before. If you have made some financial mistakes, how long does this information remain on your credit report? What kinds of financial oversights are more severe than others? This article will delve into these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will specify the type of information that is usually found on your credit report:
Personal Information for instance 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, for instance, any overdue or unpaid debts that have since been paid
Defaults and other infringements including missed minimum credit card repayments and loan repayments which are over 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most critical 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 feature 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 creditors will be posted on your credit report and will affect your capacity to receive credit down the road, so it’s critical to comprehend what constitutes a default on your credit report. If you fail to make a repayment on a debt, your creditor has the ability to report your debt to a credit reporting agency who will then record this information on your credit report. However, 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 means 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 notify you of any intents in lodging a report before doing this. Normally, 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 Remain On My Credit Report
Most of the time, a credit default will stay on your credit report for 5 years, but if a creditor cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the consequences are more harsh and the default will remain on your credit report for 7 years. It is necessary to bear in mind 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 reflect that the debt has been settled. Every time you apply for a loan, the financial institution will always examine your credit report first and if there are any defaults, the lending institution can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based on your bad credit report.
As you can see, credit reports are very serious documents that can dramatically impact your borrowing capability and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be detailed on your credit report for five years. Even though there are measures to improve your credit rating (for instance 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 schedule, so if you find yourself with any financial troubles and can’t pay your bills by their due date, get in touch with Bankruptcy Experts Taree on 1300 795 575 for help, or visit their website for more information: www.bankruptcyexpertstaree.com.au