A credit report is a comprehensive document that contains your history with creditors and has a considerable effect on your future financial capabilities. Possessing a ‘good’ credit report is typical provided that you pay your bills and debt repayments in a timely manner. However, missing a repayment on a bill or debt repayment can cause considerable complications if you plan to receive credit again down the road. Not long ago, the rules have been altered to place a greater significance on affirmative history like paying your bills in a timely manner, but overwhelmingly, credit reports are used as a way for lenders to ascertain your capabilities to repay a loan by looking for any financial mistakes you’ve made before. If you have made some financial oversights, how long does this information stay on your credit report? What types of financial errors are more severe than others? This post will investigate these questions to give you a better understanding of how these documents work.

What Do Credit Reports Consist of

The following will list the kind of information that is regularly found on your credit report:

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

Joint applicant details if you’ve obtained credit jointly with another person

Credit card information

Arrears brought up to date, for example, any overdue or unpaid debts that have since been repaid

Defaults and other infringements including 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 critical factor 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 for example 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 mentioned on your credit report and will affect your capability to secure credit down the road, so it’s necessary to recognise what constitutes a default on your credit report. If you fail to make a repayment on a debt, your loan provider has the ability to report your debt to a credit reporting agency who will then record this information on your credit report. Having said that, creditors can only do this if the following rules apply:

The default amount is $150 or more;

You’re a ‘confirmed missing debtor’ or ‘clearout’ which suggests the lender cannot contact you because you have changed your contact number and address;

The debt is equal to or more than 60 days 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 advise you of any intentions in lodging a report before doing this. Often, 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, however if a lending institution cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more severe and the default will stay on your credit report for seven years. It is essential to bear in mind that even when you do settle an overdue debt, the default will nevertheless remain on your credit report, but the status will be updated to show that the debt has been paid. Each time you make an application for a loan, the loan provider will always review your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must inform you that your application has been rejected based on your bad credit report.

As you can see, credit reports are very serious documents that can dramatically impact your borrowing capacity and financial flexibility. In many cases, 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), lending 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 time, so if you end up with any financial issues and can’t pay your bills by their due date, call Bankruptcy Experts Rockhampton on 1300 795 575 for support, or visit their website for additional information: http://www.bankruptcyexpertsrockhampton.com.au

Sources:

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