A credit report is an in-depth document that lists your history with creditors and has a notable effect on your future financial capabilities. Having a ‘good’ credit report is conventional so long as you pay your bills and debt repayments on time. However, skipping a repayment on a bill or debt repayment can cause considerable complications if you plan to acquire credit again in the future. In recent times, the rules have been changed to place a greater focus on favourable history such as paying your bills on time, but overwhelmingly, credit reports are used as a way for creditors to ascertain your capabilities to repay a loan by looking for any financial errors you’ve made previously. If you have made some financial mistakes, how long does this information remain on your credit report? What types of financial errors are more severe than others? This post will delve into these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will detail the kind of information that is typically found on your credit report:
Personal Information including your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another individual
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been settled
Defaults and other infringements including missed minimum credit card repayments and loan repayments which are more than 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most important 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 for instance any business or commercial loan applications
Report requests which lists all the lenders who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be detailed on your credit report and will impact your ability to attain credit down the road, so it’s vital to comprehend what constitutes a default on your credit report. If you fail to make a payment on a debt, your lending institution has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. But, lenders 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 indicates the lender cannot contact you because you have changed your contact number and address;
The debt is equal to or more than 60 days 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 financial institution must inform you of any intents in lodging a report before doing so. Often, 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
For the most parts, a credit default will remain on your credit report for 5 years, although if a lending institution cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the penalties are more serious and the default will remain on your credit report for seven years. It is essential to bear in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, however the status will be updated to show that the debt has been settled. Every time you make an application for a loan, the loan provider will always evaluate your credit report first and if there are any defaults, the creditor 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 serious documents that can significantly impact your borrowing capability and financial flexibility. Most of the time, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be recorded on your credit report for five years. While there are measures to improve your credit rating (for example 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 schedule, so if you find yourself with any financial problems and can’t pay your bills by their due date, talk with Bankruptcy Experts Hervey Bay on 1300 795 575 for help, or visit their website for additional information: http://www.bankruptcyexpertsherveybay.com.au