A credit report is a specific document that details your history with creditors and has a substantial effect on your future financial capabilities. Having a ‘good’ credit report is basic so long as you pay your bills and debt repayments on time. Having said that, missing a repayment on a bill or debt repayment can cause considerable problems if you plan to obtain credit again down the road. In recent times, the rules have been altered to place a greater emphasis on affirmative history like paying your bills on time, but overwhelmingly, credit reports are utilised as a way for lenders to evaluate your capabilities to repay a loan by looking for any financial errors you’ve made before. If you have made some financial mistakes, how long does this information stay on your credit report? What kinds of financial errors are more serious than others? This article will take a 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 itemise the kind of information that is traditionally found on your credit report:
Personal Information for instance your name, DOB, address and driver’s licence details
Joint applicant details if you’ve acquired credit jointly with another entity
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been repaid
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 like bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most crucial factor 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 partial payments if applicable
Commercial credit applications including 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 alter your capacity to receive credit in the future, so it’s paramount to comprehend 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. But, financial institutions can only do this if the following prerequisites apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which signifies 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 asked 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 notify you of any intentions in lodging a report before doing this. In most cases, 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 most cases, a credit default will remain on your credit report for five years, however if a lender cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the penalties are more harsh and the default will continue to be on your credit report for 7 years. It is very important to keep in mind that even when you do repay an overdue debt, the default will still remain on your credit report, but the status will be updated to show that the debt has been repaid. Each time you make an application for a loan, the financial institution will always review your credit report first and if there are any defaults, the lending institution 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 notably impact your borrowing capability and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be detailed on your credit report for five years. Whilst there are measures to improve your credit rating (such as paying your bills on time), lending institutions 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 time, so if you find yourself with any financial difficulties and can’t pay your bills by their due date, speak with Bankruptcy Experts Wyong on 1300 795 575 for help, or visit their website for more information: http://www.bankruptcyexpertswyong.com.au