A credit report is a specific document that shows your history with creditors and has a considerable effect on your future financial abilities. Having a ‘good’ credit report is normal so long as you pay your bills and debt repayments on schedule. However, overlooking a repayment on a bill or debt repayment can cause significant complications if you plan to acquire credit again in the future. Recently, the rules have been changed to place a greater significance on constructive history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a way for lenders to determine your abilities to repay a loan by looking for any financial oversights you’ve made before. If you have made some financial mistakes, how long does this information stay on your credit report? What types of financial oversights are more drastic than others? This post will explore these questions to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will provide the type of information that is generally found on your credit report:
Personal Information for example your name, DOB, address 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 repaid
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 likely the most vital 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 such as any business or commercial loan applications
Report requests which lists all the loan providers who have previously requested a copy of your credit report
Credit Report Defaults
Defaults with lenders will be posted on your credit report and will impact your capability to attain credit down the road, so it’s crucial to understand what constitutes a default on your credit report. If you fail to make a repayment on a debt, your lending institution has the ability to report your debt to a credit reporting agency who will then document this information on your credit report. But, lenders 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 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 requested 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 notify you of any intents in lodging a report prior to doing this. Frequently, your contract or service agreement will describe when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
In the majority of cases, a credit default will remain on your credit report for five years, although if a creditor cannot contact you because you’ve changed your telephone 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 mention that even when you do settle an overdue debt, the default will nevertheless stay on your credit report, however the status will be updated to show that the debt has been paid. Whenever you apply for a loan, the financial institution will always review 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 based upon your bad credit report.
As you can see, credit reports are serious documents that can drastically impact your borrowing capability and financial flexibility. In most cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be recorded on your credit report for five years. While there are measures to improve your credit rating (such as paying your bills on schedule), 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 schedule, so if you end up with any financial problems and can’t pay your bills by their due date, talk to Bankruptcy Experts Perth on 1300 795 575 for support, or visit their website for more details: Bankruptcy Perth