A credit report is a detailed document that lists your history with creditors and has a major effect on your future financial abilities. Having a ‘good’ credit report is normal as long as you pay your bills and debt repayments on time. However, missing a repayment on a bill or debt repayment can cause significant complications if you want to receive credit again down the road. In recent times, the rules have been changed to place a greater emphasis on favourable history like paying your bills on time, but overwhelmingly, credit reports are used as a means for lenders to examine your abilities to repay a loan by looking for any financial mistakes you’ve made previously. If you have made some financial oversights, how long does this information stay on your credit report? What kinds of financial oversights are more notable than others? This blog will investigate these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will detail the kind of information that is typically found on your credit report:
Personal Information for example your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another individual
Credit card information
Arrears brought up to date, for instance, 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 for example bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most meaningful 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 including any business or commercial loan applications
Report requests which lists all the loan providers who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be shown on your credit report and will affect your capacity to obtain credit in the future, so it’s vital to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your lender has the capability to report your debt to a credit reporting agency who will then register this information on your credit report. However, financial institutions can only do this if the following rules apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which implies 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 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 intents in lodging a report prior to doing so. Traditionally, 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 Stay On My Credit Report
For the most parts, a credit default will stay on your credit report for 5 years, although if a financial institution cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the consequences are more extreme and the default will stay on your credit report for seven years. It is very important to keep in mind that even when you do settle an overdue debt, the default will nonetheless stay on your credit report, however the status will be updated to reflect that the debt has been settled. Any time you apply for a loan, the lender will always check 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 advise you that your application has been rejected founded on your bad credit history.
As you can see, credit reports are very serious documents that can significantly impact your borrowing capability and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be noted on your credit report for five years. While there are measures to improve your credit rating (for instance paying your bills on schedule), 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 time, so if you end up with any financial challenges and can’t pay your bills by their due date, speak with Bankruptcy Experts Gold Coast on 1300 879 867 for assistance, or visit their website for additional information: http://www.bankruptcyexpertsgoldcoast.com.au