A credit report is an in-depth document that shows your history with creditors and has a substantial effect on your future financial opportunities. Having a ‘good’ credit report is typical as long as you pay your bills and debt repayments on time. However, skipping a repayment on a bill or debt repayment can cause substantial complications if you need to secure credit again in the future. In recent years, the rules have been remodelled to place a greater focus on positive history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a way for creditors to analyse your abilities to repay a loan by looking for any financial mistakes you’ve made in the past. If you have made some financial mistakes, how long does this information remain on your credit report? What kinds of financial oversights are more severe than others? This blog will take a look at these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will provide the kind of information that is commonly found on your credit report:
Personal Information such as your name, address, DOB and driver’s licence details
Joint applicant details if you’ve received credit jointly with another person
Credit card information
Arrears brought up to date, for example, any overdue or unpaid debts that have since been settled
Defaults and other infringements for instance missed minimum credit card repayments and loan repayments which are greater than 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most meaningful component 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 for example 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 ability to acquire credit in the future, so it’s crucial to comprehend what constitutes a default on your credit report. If you fail to make a payment on a debt, your financial institution has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. But, creditors can only do this if the following terms 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 intents in lodging a report prior to doing this. Normally, your contract or service agreement will state when a default can be made and reported to a credit reporting agency.
How Long Does A Default Remain On My Credit Report
In most cases, a credit default will remain on your credit report for five years, however if a financial institution cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more extreme and the default will remain on your credit report for 7 years. It is essential to note that even when you do settle an overdue debt, the default will still stay on your credit report, but the status will be updated to reflect that the debt has been paid. When you make an application for a loan, the loan provider will always check your credit report first and if there are any defaults, the creditor can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected founded on your poor credit history.
As you can see, credit reports are serious documents that can greatly impact your borrowing capacity 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 in a timely manner), creditors 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 to Bankruptcy Melbourne on 1300 879 867 for help, or visit their website for additional information: Bankruptcy Melbourne