A credit report is a specific document that records your history with creditors and has a major effect on your future financial abilities. Having a ‘good’ credit report is conventional as long as you pay your bills and debt repayments punctually. On the other hand, overlooking a repayment on a bill or debt repayment can cause significant problems if you plan to acquire credit again down the road. In recent times, the rules have been adjusted to place a greater importance on favourable history such as paying your bills in a timely manner, but overwhelmingly, credit reports are used as a means for creditors to assess your capabilities to repay a loan by checking for any financial errors you’ve made in the past. If you have made some financial oversights, how long does this information stay on your credit report? What types of financial errors are more notable than others? This post will look at these questions in order to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will specify the type of information that is commonly found on your credit report:
Personal Information such as your name, DOB, address and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another person
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been paid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are over 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most critical 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 feature information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications including 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 creditors will be mentioned on your credit report and will impair your ability to secure credit down the road, so it’s very important to recognise what constitutes a default on your credit report. If you fail to make a payment on a debt, your lender has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. But, loan providers can only do this if the following prerequisites apply:
The default amount is $150 or more;
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 asked 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 inform you of any intents in lodging a report before doing this. Normally, your contract or service agreement will outline 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 remain on your credit report for 5 years, but 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 continue to be on your credit report for 7 years. It is essential to note that even when you do repay an overdue debt, the default will nevertheless stay on your credit report, however the status will be updated to reflect that the debt has been settled. When you apply for a loan, the lender will always check your credit report first and if there are any defaults, the lending institution can reject such loan applications. If this is the case, the lender must notify you that your application has been rejected based upon your bad credit report.
As you can see, credit reports are serious documents that can notably impact your borrowing capability and financial flexibility. The majority of the time, credit reports are either a pass or a fail, so any default, despite how big or small, will be specified on your credit report for five years. Whilst there are measures to improve your credit rating (such as paying your bills on time), lenders 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 in a timely manner, so if you end up with any financial issues and can’t pay your bills by their due date, get in contact with Liquidation Service on 1300 795 575 for help, or visit their website for more details: www.liquidationservice.com.au