A credit report is a comprehensive document that contains your history with creditors and has a considerable effect on your future financial capabilities. Having a ‘good’ credit report is conventional so long as you pay your bills and debt repayments in a timely manner. On the other hand, overlooking a repayment on a bill or debt repayment can cause considerable issues if you want to acquire credit again in the future. In recent years, the rules have been remodelled to place a greater significance on desirable history such as paying your bills on schedule, but overwhelmingly, credit reports are utilised as a way for creditors to assess your abilities 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 oversights are more notable than others? This post will look at 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 usually found on your credit report:
Personal Information such as your name, address, DOB and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another person
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been paid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are more than 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps the most key 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 feature information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications such as any business or commercial loan applications
Report requests which lists all the financial institutions who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with creditors will be noted on your credit report and will affect your capacity to attain credit down the road, so it’s essential to understand what constitutes a default on your credit report. If you cannot make a repayment on a debt, your loan provider has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. But, loan providers 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 suggests the lender cannot contact you because you have changed your telephone number and address;
The debt is equal to or more than 60 days 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 financial institution must advise you of any intentions in lodging a report prior to doing this. Generally, 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 Stay On My Credit Report
For the most parts, a credit default will remain on your credit report for five years, but if a loan provider cannot contact you because you’ve changed your telephone number and address (also known as ‘clearout’), the penalties are more harsh and the default will remain on your credit report for 7 years. It is necessary to keep in mind that even when you do settle an overdue debt, the default will nonetheless remain on your credit report, however the status will be updated to show that the debt has been repaid. Whenever you apply for a loan, the creditor will always check 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 notify you that your application has been rejected based on your bad credit report.
As you can see, credit reports are serious documents that can considerably impact your borrowing capacity 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 specified on your credit report for five years. Although there are measures to improve your credit rating (for example paying your bills on time), 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 in a timely manner, so if you find yourself with any financial complications and can’t pay your bills by their due date, talk with Bankruptcy Experts Bunbury on 1300 795 575 for help, or visit their website for more information: www.bankruptcyexpertsbunbury.com.au