A credit report is a comprehensive document that specifies your history with creditors and has a significant effect on your future financial opportunities. Possessing a ‘good’ credit report is standard so long as you pay your bills and debt repayments punctually. Having said that, missing a repayment on a bill or debt repayment can cause significant issues if you plan to gain credit again in the future. A while ago, the rules have been remodelled to place a greater focus on positive history like paying your bills in a timely manner, but overwhelmingly, credit reports are used as a way for creditors to evaluate your abilities to repay a loan by checking for any financial mistakes you’ve made in the past. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial mistakes are more notable 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 Consist of
The following will specify the kind of information that is regularly found on your credit report:
Personal Information such as 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 instance, 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 more than 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is perhaps the most key element 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 such as 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 noted on your credit report and will impair your potential to obtain credit in the future, so it’s significant 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. With that being said, 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 contact number and address;
The debt is 60 days or more 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 lender must advise you of any intentions in lodging a report prior to doing so. Often, your contract or service agreement will stipulate when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
The majority of the time, a credit default will remain on your credit report for five years, although if a financial institution cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more harsh 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 repay an overdue debt, the default will nonetheless remain on your credit report, but the status will be updated to show that the debt has been paid. Any time you make an application for a loan, the loan provider will always evaluate 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 inform 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 notably impact your borrowing capacity 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 recorded on your credit report for five years. Although there are measures to improve your credit rating (for instance paying your bills on time), loan providers 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 time, so if you end up with any financial troubles and can’t pay your bills by their due date, speak to Bankruptcy Experts Port Stephens on 1300 795 575 for assistance, or visit their website for additional information: http://www.bankruptcyexpertsportstephens.com.au