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A credit report is a comprehensive document that specifies your history with creditors and has a significant effect on your future financial abilities. Having a ‘good’ credit report is standard provided that you pay your bills and debt repayments on schedule. On the other hand, skipping a repayment on a bill or debt repayment can cause considerable complications if you plan to acquire credit again down the road. In recent times, the rules have been modified to place a greater focus on affirmative history like paying your bills on time, but overwhelmingly, credit reports are used as a way for lenders to determine your capabilities to repay a loan by looking for any financial errors you’ve made in the past. If you have made some financial errors, how long does this information stay on your credit report? What types of financial mistakes are more drastic than others? This post will delve into these questions to give you a better understanding of how these documents work.

What Do Credit Reports Entail

The following will itemise the kind of information that is commonly found on your credit report:

Personal Information for instance your name, DOB, driver’s licence details and address

Joint applicant details if you’ve secured 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 including missed minimum credit card repayments and loan repayments which are more than 60 days overdue

All credit applications

Debt agreements such as bankruptcy, personal insolvency, and court judgements

Repayment history which is probably 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 contain information such as the due date, paid date, amount, and any part payments if applicable

Commercial credit applications for example 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 listed on your credit report and will have an effect on your ability to attain credit down the road, so it’s imperative to comprehend what constitutes a default on your credit report. If you fail to make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then note this information on your credit report. But, creditors 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 implies the lender cannot contact you because you have changed your phone 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 loan provider must inform you of any intents in lodging a report prior to doing so. In most cases, 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

In the majority of cases, a credit default will stay on your credit report for 5 years, although if a lender cannot contact you because you’ve changed your contact number and address (referred to as ‘clearout’), the consequences are more extreme and the default will stay on your credit report for seven years. It is essential to keep in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, but the status will be updated to reflect that the debt has been paid. Whenever you make an application for a loan, the creditor will always review 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 based upon your bad credit report.

As you can see, credit reports are serious documents that can substantially impact your borrowing capability 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 noted on your credit report for five years. Although there are measures to improve your credit rating (such as paying your bills in a timely manner), 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 find yourself with any financial troubles and can’t pay your bills by their due date, speak to Bankruptcy Experts Dandenong on 1300 795 575 for help, or visit their website for more details: http://www.bankruptcyexpertsdandenong.com.au

Sources:

https://www.moneysmart.gov.au/borrowing-and-credit/borrowing-basics/credit-reports

 

What Stays On Your Credit Report And For How Long?