A credit report is a comprehensive document that details your history with creditors and has a notable effect on your future financial opportunities. Having a ‘good’ credit report is standard provided that you pay your bills and debt repayments on time. Having said that, overlooking a repayment on a bill or debt repayment can cause considerable issues if you wish to secure credit again down the road. A while ago, the rules have been remodelled to place a greater significance on favourable history like paying your bills on schedule, but overwhelmingly, credit reports are used as a way for creditors to evaluate your capabilities to repay a loan by checking for any financial errors you’ve made in the past. If you have made some financial mistakes, how long does this information remain on your credit report? What types of financial mistakes are more drastic than others? This article will investigate these questions 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 generally found on your credit report:
Personal Information such as your name, DOB, driver’s licence details and address
Joint applicant details if you’ve secured credit jointly with another person
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been repaid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are over 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps the most crucial 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 include information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications for example 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 alter your potential to acquire credit in the future, so it’s imperative to understand 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 document this information on your credit report. But, lenders can only do this if the following terms apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which means the lender cannot contact you because you have changed your phone 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 creditor must inform you of any intents in lodging a report prior to doing so. Frequently, 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
Most of the time, a credit default will stay on your credit report for five years, but if a creditor cannot contact you because you’ve changed your telephone number and address (referred to as ‘clearout’), the consequences are more severe and the default will stay on your credit report for seven years. It is necessary to note that even when you do settle an overdue debt, the default will nevertheless stay on your credit report, however the status will be updated to show that the debt has been settled. When you make an application for a loan, the creditor 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 advise you that your application has been rejected based upon your poor 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 recorded on your credit report for five years. While 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 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, call Bankruptcy Experts Mildura on 1300 795 575 for assistance, or visit their website for additional information: http://www.bankruptcyexpertsmildura.com.au