A credit report is a detailed document that contains your history with creditors and has a notable effect on your future financial capabilities. Possessing a ‘good’ credit report is normal provided that you pay your bills and debt repayments on time. Having said that, overlooking a repayment on a bill or debt repayment can cause significant problems if you intend to acquire credit again down the road. In recent years, the rules have been altered to place a greater importance on positive history such as paying your bills on time, but overwhelmingly, credit reports are utilised as a way for creditors to assess your abilities to repay a loan by checking for any financial errors you’ve made before. If you have made some financial errors, how long does this information stay on your credit report? What types of financial mistakes are more notable than others? This blog will take a look at these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will itemise the kind of information that is traditionally found on your credit report:
Personal Information including your name, DOB, address and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another individual
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
Defaults and other infringements for example missed minimum credit card repayments and loan repayments which are greater than 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most key element 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 for example 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 lenders will be shown on your credit report and will affect your capacity to secure credit in the future, so it’s essential 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 note this information on your credit report. Having said that, creditors can only do this if the following prerequisites 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 telephone 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 lender must notify you of any intentions in lodging a report prior to doing so. Typically, your contract or service agreement will stipulate when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
In the majority of cases, a credit default will stay on your credit report for five years, but if a creditor cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for 7 years. It is necessary to keep in mind that even when you do repay an overdue debt, the default will nonetheless stay on your credit report, but the status will be updated to reflect that the debt has been settled. Each time you apply for a loan, the financial institution will always inspect 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 based upon your bad credit history.
As you can see, credit reports are very serious documents that can drastically impact your borrowing capacity and financial flexibility. Most of the time, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be mentioned on your credit report for five years. Though there are measures to improve your credit rating (such as paying your bills in a timely manner), loan providers 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 find yourself with any financial complications and can’t pay your bills by their due date, contact Bankruptcy Experts Frankston on 1300 795 575 for support, or visit their website for additional information: www.bankruptcyexpertsfrankston.com.au