A credit report is a detailed document that specifies your history with creditors and has a considerable effect on your future financial capabilities. Having a ‘good’ credit report is basic provided that you pay your bills and debt repayments on time. On the other hand, skipping a repayment on a bill or debt repayment can cause significant issues if you want to acquire credit again down the road. In recent times, the rules have been remodelled to place a greater importance on positive history such as paying your bills in a timely manner, but overwhelmingly, credit reports are used as a way for lenders to determine your abilities to repay a loan by looking for any financial errors you’ve made previously. If you have made some financial errors, how long does this information remain on your credit report? What types of financial oversights are more drastic than others? This post will explore these questions to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will provide the kind of information that is usually found on your credit report:
Personal Information for instance your name, address, DOB and driver’s licence details
Joint applicant details if you’ve secured 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 example missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most key element 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 include 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 lending institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be listed on your credit report and will impair your ability to acquire credit down the road, so it’s very important to recognise what constitutes a default on your credit report. If you cannot make a payment on a debt, your loan provider has the ability to report your debt to a credit reporting agency who will then note this information on your credit report. But, financial institutions 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 phone 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 lender must inform you of any intentions in lodging a report prior to doing so. Often, your contract or service agreement will detail when a default can be made and reported to a credit reporting agency.
How Long Does A Default Remain On My Credit Repor
For the most parts, a credit default will stay on your credit report for 5 years, but if a financial institution cannot contact you because you’ve changed your contact number and address (referred to as ‘clearout’), the consequences are more harsh and the default will continue to be on your credit report for 7 years. It is very important to note that even when you do repay an overdue debt, the default will nevertheless stay on your credit report, but the status will be updated to reflect that the debt has been settled. Any time you make an application for a loan, the financial institution will always look at your credit report first and if there are any defaults, the financial institution can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected founded on your bad credit report.
As you can see, credit reports are serious documents that can dramatically impact your borrowing capability and financial flexibility. In the majority of cases, 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 (like 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 complications and can’t pay your bills by their due date, reach out to Bankruptcy Advice Perth on 1300 879 867 for support, or visit their website for additional information: www.bankruptcy-advice.com.au/perth