What Stays On Your Credit Report And For How Long?
A credit report is a specific document that specifies your history with creditors and has a major effect on your future financial abilities. Possessing a ‘good’ credit report is basic so long as you pay your bills and debt repayments in a timely manner. Having said that, skipping a repayment on a bill or debt repayment can cause substantial problems if you need to obtain credit again in the future. Not long ago, the rules have been changed to place a greater significance on affirmative history such as paying your bills on schedule, but overwhelmingly, credit reports are utilised as a means for lenders to determine your capabilities to repay a loan by looking for any financial mistakes 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 mistakes are more serious than others? This blog will look at these questions to give you a better understanding of how these documents work.
What Do Credit Reports Consist of
The following will provide the type of information that is generally found on your credit report:
Personal Information including your name, DOB, address and driver’s licence details
Joint applicant details if you’ve acquired credit jointly with another individual
Credit card information
Arrears brought up to date, for instance, any overdue or unpaid debts that have since been paid
Defaults and other infringements for instance 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 key 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 include information such as the due date, paid date, amount, and any partial 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 lenders will be specified on your credit report and will have an effect on your ability to secure credit down the road, so it’s critical 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 capability to report your debt to a credit reporting agency who will then document 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 indicates 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 asked 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 intentions in lodging a report before doing so. Usually, your contract or service agreement will detail when a default can be made and reported to a credit reporting agency.
How Long Does A Default Stay On My Credit Report
In most cases, a credit default will remain on your credit report for five years, although if a financial institution cannot contact you because you’ve changed your telephone number and address (referred to as ‘clearout’), the penalties are more severe and the default will remain on your credit report for 7 years. It is essential to bear in mind that even when you do settle an overdue debt, the default will continue to remain on your credit report, however the status will be updated to reflect that the debt has been paid. When you make an application for a loan, the creditor will always assess your credit report first and if there are any defaults, the creditor 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 serious documents that can substantially impact your borrowing capability and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be listed on your credit report for five years. Although there are measures to improve your credit rating (for instance paying your bills on schedule), 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 in a timely manner, so if you find yourself with any financial complications and can’t pay your bills by their due date, contact Bankruptcy Experts Joondalup on 1300 795 575 for help, or visit their website for more information: www.bankruptcyexpertsjoondalup.com.au