|August 3, 2017||Comments Closed|
A credit report is an in-depth document that details your history with creditors and has a significant effect on your future financial abilities. Having a ‘good’ credit report is basic provided that 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 significant issues if you need to acquire credit again in the future. Not long ago, the rules have been changed to place a greater importance on desirable history like paying your bills on schedule, but overwhelmingly, credit reports are utilised as a way for lenders to determine your capabilities to repay a loan by checking for any financial mistakes you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial oversights are more severe than others? This article will explore 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 type of information that is usually found on your credit report:
Personal Information for example your name, DOB, driver’s licence details and address
Joint applicant details if you’ve obtained credit jointly with another entity
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
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 for example bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps 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 include information such as the due date, paid date, amount, and any partial 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 creditors will be mentioned on your credit report and will have an effect on your capacity to secure credit in the future, so it’s critical to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your creditor has the ability to report your debt to a credit reporting agency who will then document this information on your credit report. However, financial institutions 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 signifies the lender cannot contact you because you have changed your contact 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 loan provider must notify you of any intentions in lodging a report before doing so. Typically, 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
Most of the time, a credit default will stay on your credit report for 5 years, however if a lender cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the consequences are more harsh and the default will remain on your credit report for seven years. It is necessary to mention that even when you do settle an overdue debt, the default will still stay on your credit report, however the status will be updated to reflect that the debt has been settled. Every time you apply for a loan, the lender will always assess your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must advise you that your application has been rejected founded on your poor credit report.
As you can see, credit reports are serious documents that can considerably impact your borrowing capacity and financial flexibility. Most of the time, 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. Even though there are measures to improve your credit rating (for example 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 challenges and can’t pay your bills by their due date, get in touch with Bankruptcy Experts Bendigo on 1300 795 575 for assistance, or visit their website for additional information: www.bankruptcyexpertsbendigo.com.au