A credit report is an in-depth document that lists your history with creditors and has a major effect on your future financial opportunities. Possessing a ‘good’ credit report is regular as long as you pay your bills and debt repayments punctually. On the other hand, skipping a repayment on a bill or debt repayment can cause considerable problems if you plan to receive credit again down the road. In recent years, the rules have been remodelled to place a greater significance on favourable history such as paying your bills on time, but overwhelmingly, credit reports are used as a way for lenders to determine your capabilities to repay a loan by looking for any financial errors 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 blog will look at 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 including your name, DOB, address 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 example, 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 more than 60 days overdue
All credit applications
Debt agreements such as bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most important aspect 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 part payments if applicable
Commercial credit applications for example 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 creditors will be detailed on your credit report and will impact your potential to attain credit in the future, so it’s necessary to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your lender has the capability to report your debt to a credit reporting agency who will then record this information on your credit report. But, loan providers can only do this if the following terms apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which implies the lender cannot contact you because you have changed your telephone number and address;
The debt is equal to or more than 60 days 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 lending institution must notify you of any intentions in lodging a report prior to doing this. Commonly, 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
Most of the time, a credit default will stay on your credit report for five years, although if a creditor cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more harsh and the default will stay on your credit report for seven years. It is very important to bear in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, but the status will be updated to reflect that the debt has been settled. Each time you make an application for a loan, the creditor will always review 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 based on your bad credit history.
As you can see, credit reports are very serious documents that can significantly impact your borrowing capability and financial flexibility. In most cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be detailed on your credit report for five years. Though there are measures to improve your credit rating (for instance paying your bills on schedule), loan providers 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 end up with any financial complications and can’t pay your bills by their due date, contact Bankruptcy Experts Northern Rivers on 1300 795 575 for support, or visit their website for more information: http://www.bankruptcyexpertsnorthernrivers.com.au