A credit report is a comprehensive document that contains your history with creditors and has a notable effect on your future financial abilities. Having a ‘good’ credit report is typical provided that you pay your bills and debt repayments in a timely manner. Having said that, skipping a repayment on a bill or debt repayment can cause considerable problems if you wish to receive credit again down the road. A while ago, the rules have been adjusted to place a greater importance on favourable history like paying your bills on time, but overwhelmingly, credit reports are utilised as a means for creditors to examine your abilities 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 kinds of financial oversights are more notable than others? This blog will look at these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will detail the kind of information that is regularly found on your credit report:
Personal Information such as your name, DOB, address and driver’s licence details
Joint applicant details if you’ve received credit jointly with another individual
Credit card information
Arrears brought up to date, such as 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 like bankruptcy, personal insolvency, and court judgement
Repayment history which is probably the most critical factor of your credit report. It covers all credit accounts like home loans, car loans, personal loans and credit card loans. Any missed repayments will feature information such as the due date, paid date, amount, and any partial payments if applicable
Commercial credit applications such as any business or commercial loan applications
Report requests which lists all the financial institutions who have previously requested a copy of your credit report
Credit Report Defaults
Defaults with lenders will be shown on your credit report and will impair your capacity to obtain credit down the road, 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 lending 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, financial institutions can only do this if the following prerequisites apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which indicates 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 phone
Your loan provider must inform you of any intents in lodging a report prior to doing so. Often, 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
The majority of the time, a credit default will stay on your credit report for five years, however if a creditor cannot contact you because you’ve changed your contact number and address (referred to as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for 7 years. It’s important to keep in mind that even when you do repay an overdue debt, the default will still stay on your credit report, but the status will be updated to show that the debt has been paid. Whenever you make an application for a loan, the lending institution 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 advise you that your application has been rejected founded on your bad credit history.
As you can see, credit reports are serious documents that can substantially impact your borrowing capacity 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 detailed on your credit report for five years. Although there are measures to improve your credit rating (for instance 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 challenges and can’t pay your bills by their due date, speak with Bankruptcy Experts Shepparton on 1300 795 575 for help, or visit their website for more details: http://www.bankruptcyexpertsshepparton.com.au