A credit report is a specific document that records your history with creditors and has a notable effect on your future financial capabilities. Having a ‘good’ credit report is typical provided that you pay your bills and debt repayments punctually. Having said that, overlooking a repayment on a bill or debt repayment can cause serious problems if you wish to receive credit again down the road. Not long ago, the rules have been adjusted to place a greater importance on desirable history like 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 checking for any financial mistakes you’ve made before. If you have made some financial errors, how long does this information stay on your credit report? What kinds of financial mistakes are more drastic than others? This article 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 detail the kind of information that is normally 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 person
Credit card information
Arrears brought up to date, for example, 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 in excess of 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps the most meaningful factor 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 including 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 lenders will be noted on your credit report and will alter your potential to receive credit in the future, so it’s necessary to comprehend what constitutes a default on your credit report. If you cannot 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. However, creditors can only do this if the following rules apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which suggests 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 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 advise you of any intents in lodging a report prior to doing this. Frequently, 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
In most cases, a credit default will remain on your credit report for five years, however if a creditor cannot contact you because you’ve changed your contact number and address (known as ‘clearout’), the consequences are more serious and the default will continue to be on your credit report for seven years. It is essential to bear in mind that even when you do repay an overdue debt, the default will still stay on your credit report, however the status will be updated to show that the debt has been settled. Any time you make an application for a loan, the financial institution will always assess 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 notify you that your application has been rejected based upon your bad credit report.
As you can see, credit reports are serious documents that can dramatically impact your borrowing capacity and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be specified on your credit report for five years. Whilst there are measures to improve your credit rating (like paying your bills on schedule), creditors 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 in a timely manner, so if you end up with any financial issues and can’t pay your bills by their due date, contact Bankruptcy Advice on 1300 879 867 for assistance, or visit their website for more information: www.bankruptcy-advice.com.au/