A credit report is an in-depth document that contains your history with creditors and has a considerable effect on your future financial capabilities. Having a ‘good’ credit report is standard provided that you pay your bills and debt repayments in a timely manner. However, skipping a repayment on a bill or debt repayment can cause substantial issues if you plan to secure credit again in the future. A while ago, the rules have been modified to place a greater significance on favourable history like paying your bills on time, but overwhelmingly, credit reports are utilised as a means for lenders to evaluate your capabilities to repay a loan by looking for any financial errors you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial oversights are more drastic than others? This post will examine these questions 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 usually found on your credit report:
Personal Information for instance your name, address, DOB and driver’s licence details
Joint applicant details if you’ve secured credit jointly with another individual
Credit card information
Arrears brought up to date, such as any overdue or unpaid debts that have since been repaid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements for instance bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most meaningful aspect of your credit report. It covers all credit accounts like 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 for instance 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 noted on your credit report and will affect your capability to attain credit down the road, so it’s essential to understand what constitutes a default on your credit report. If you fail to make a repayment on a debt, your financial institution has the capability to report your debt to a credit reporting agency who will then record this information on your credit report. Having said that, lending institutions can only do this if the following rules apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which means the lender cannot contact you because you have changed your telephone 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 notify you of any intentions in lodging a report before doing this. Traditionally, 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 Remain On My Credit Report
Most of the time, a credit default will remain on your credit report for five years, although if a lender cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more harsh and the default will remain on your credit report for seven years. It is necessary to note that even when you do settle 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. Each time you apply for a loan, the creditor will always check 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 based upon your poor credit history.
As you can see, credit reports are serious documents that can considerably 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 specified on your credit report for five years. Though there are measures to improve your credit rating (like paying your bills on time), lenders 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 in a timely manner, so if you find yourself with any financial issues and can’t pay your bills by their due date, speak to Bankruptcy Experts Toowoomba on 1300 795 575 for support, or visit their website for more details: Bankruptcy Experts Toowoomba