A credit report is an in-depth document that lists your history with creditors and has a major effect on your future financial abilities. Possessing a ‘good’ credit report is common as long as you pay your bills and debt repayments in a timely manner. However, overlooking a repayment on a bill or debt repayment can cause serious complications if you need to obtain credit again in the future. A while ago, the rules have been adjusted to place a greater focus on positive history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a means for creditors to ascertain your capabilities to repay a loan by checking for any financial errors you’ve made previously. If you have made some financial errors, how long does this information remain on your credit report? What types of financial errors are more serious 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 itemise the kind of information that is normally found on your credit report:

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

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 settled

Defaults and other infringements for instance 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 judgements

Repayment history which is probably the most meaningful 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 part payments if applicable

Commercial credit applications including any business or commercial loan applications

Report requests which lists all the loan providers 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 alter your capacity to secure credit in the future, so it’s paramount to understand what constitutes a default on your credit report. If you cannot make a payment on a debt, your financial institution has the ability to report your debt to a credit reporting agency who will then register this information on your credit report. Having said that, lending institutions 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 telephone 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 financial institution must notify you of any intents in lodging a report prior to doing this. Generally, 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 financial institution cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the penalties are more severe and the default will stay on your credit report for 7 years. It is necessary to keep in mind that even when you do settle an overdue debt, the default will nonetheless stay on your credit report, but the status will be updated to reflect that the debt has been paid. Any time you make an application for a loan, the financial 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 notify you that your application has been rejected based upon 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 most cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be posted on your credit report for five years. Although there are measures to improve your credit rating (for instance paying your bills in a timely manner), loan providers 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 problems and can’t pay your bills by their due date, speak with Bankruptcy Experts Whitsundays on 1300 795 575 for assistance, or visit their website for more details: Bankrupt Whitsundays

Sources:

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