A credit report is an in-depth document that records your history with creditors and has a substantial effect on your future financial opportunities. Possessing a ‘good’ credit report is common as long as you pay your bills and debt repayments on time. On the other hand, overlooking a repayment on a bill or debt repayment can cause substantial issues if you intend to receive credit again down the road. In recent years, the rules have been modified to place a greater importance on constructive history like paying your bills on time, but overwhelmingly, credit reports are used as a means for lenders to assess your abilities to repay a loan by looking for any financial mistakes you’ve made in the past. If you have made some financial errors, how long does this information remain on your credit report? What kinds of financial errors are more notable than others? This post will examine these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will detail the type of information that is normally found on your credit report:
Personal Information including your name, address, DOB and driver’s licence details
Joint applicant details if you’ve received 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 such as 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 likely 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 for instance any business or commercial loan applications
Report requests which lists all the lenders who have previously requested a copy of your credit report1
Credit Report Defaults
Defaults with lenders will be specified on your credit report and will alter your potential to acquire credit in the future, so it’s necessary to recognise 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 register this information on your credit report. Having said that, 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 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 lending institution must inform you of any intents in lodging a report prior to doing this. Generally, your contract or service agreement will outline when a default can be made and reported to a credit reporting agency.
How Long Does A Default Remain On My Credit Report
The majority of the time, a credit default will remain on your credit report for 5 years, however if a financial institution 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 continue to be on your credit report for seven years. It is necessary to bear in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, however the status will be updated to reflect that the debt has been paid. Any time you make an application for a loan, the loan provider will always look at your credit report first and if there are any defaults, the lending institution can reject such loan applications. If this is the case, the lender must notify you that your application has been rejected based upon your poor credit history.
As you can see, credit reports are very serious documents that can considerably 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 mentioned on your credit report for five years. Whilst there are measures to improve your credit rating (such as paying your bills on time), financial 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 end up with any financial issues and can’t pay your bills by their due date, call Bankruptcy Experts Cairns on 1300 795 575 for support, or visit their website for additional information: www.bankruptcyexpertscairns.com.au