A credit report is an in-depth document that records your history with creditors and has a significant effect on your future financial capabilities. Possessing a ‘good’ credit report is regular provided that you pay your bills and debt repayments punctually. On the other hand, missing a repayment on a bill or debt repayment can cause substantial complications if you wish to obtain credit again down the road. Recently, the rules have been modified to place a greater emphasis on affirmative history like paying your bills on time, but overwhelmingly, credit reports are utilised as a means for lenders to analyse your capabilities to repay a loan by looking for any financial oversights 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 article will look at these questions to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will specify the kind of information that is traditionally found on your credit report:
Personal Information for instance your name, address, DOB and driver’s licence details
Joint applicant details if you’ve obtained credit jointly with another entity
Credit card information
Arrears brought up to date, for example, 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 greater than 60 days overdue
All credit applications
Debt agreements such as bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most critical aspect of your credit report. It covers all credit accounts like 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 part payments if applicable
Commercial credit applications including 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 lenders will be detailed on your credit report and will affect your potential to secure credit in the future, so it’s important to understand what constitutes a default on your credit report. If you cannot make a repayment on a debt, your creditor has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. Having said that, lenders can only do this if the following conditions apply:
The default amount is $150 or more;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which signifies 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 asked 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 notify you of any intentions in lodging a report prior to doing this. Frequently, 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 stay on your credit report for five years, but if a financial institution cannot contact you because you’ve changed your contact number and address (known as ‘clearout’), the consequences are more harsh and the default will stay on your credit report for 7 years. It’s important to note 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 show that the debt has been repaid. Any time you apply for a loan, the creditor will always look at 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 history.
As you can see, credit reports are serious documents that can dramatically 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 specified on your credit report for five years. Even though there are measures to improve your credit rating (such as paying your bills on schedule), financial institutions are really only interested in any defaults on your credit report and can reject a loan application based upon 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 issues and can’t pay your bills by their due date, call Bankruptcy Experts Albury on 1300 795 575 for support, or visit their website for additional information: www.bankruptcyexpertsalbury.com.au