A credit report is a comprehensive document that lists 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 punctually. However, missing a repayment on a bill or debt repayment can cause serious complications if you need to obtain credit again down the road. A while ago, the rules have been adjusted to place a greater emphasis on affirmative history like paying your bills on time, but overwhelmingly, credit reports are utilised as a way for creditors to assess your abilities to repay a loan by looking for any financial oversights you’ve made previously. If you have made some financial errors, how long does this information remain on your credit report? What kinds of financial errors are more notable than others? This blog will investigate these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will provide the type of information that is traditionally found on your credit report:
Personal Information including your name, DOB, driver’s licence details and address
Joint applicant details if you’ve received credit jointly with another entity
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
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 such as bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most important 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 contain information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications for instance any business or commercial loan applications
Report requests which lists all the creditors who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be posted on your credit report and will affect your ability to attain credit down the road, so it’s imperative to recognise what constitutes a default on your credit report. If you fail to make a payment on a debt, your lender has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. With that being said, 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 indicates the lender cannot contact you because you have changed your telephone number and address;
The debt is 60 days or more 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 lending institution must inform you of any intents in lodging a report prior to doing this. Traditionally, 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 Remain On My Credit Report
Most of the time, a credit default will stay on your credit report for 5 years, but if a creditor cannot contact you because you’ve changed your contact number and address (also known as ‘clearout’), the penalties are more extreme and the default will remain on your credit report for seven years. It is essential to keep in mind that even when you do repay an overdue debt, the default will nevertheless remain on your credit report, but the status will be updated to reflect that the debt has been repaid. Whenever you make an application for a loan, the loan provider will always evaluate your credit report first and if there are any defaults, the lender can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based upon your bad credit report.
As you can see, credit reports are very serious documents that can notably impact your borrowing capacity and financial flexibility. In most cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be listed on your credit report for five years. Whilst there are measures to improve your credit rating (such as 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 end up with any financial complications and can’t pay your bills by their due date, contact Bankruptcy Experts Gympie on 1300 795 575 for help, or visit their website for additional information: http://www.bankruptcyexpertsgympie.com.au