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A credit report is a specific document that shows your history with creditors and has a considerable effect on your future financial abilities. Possessing a ‘good’ credit report is common provided that you pay your bills and debt repayments punctually. On the other hand, skipping a repayment on a bill or debt repayment can cause serious issues if you intend to gain credit again in the future. In recent years, the rules have been altered to place a greater significance on positive history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a way for lenders to examine your capabilities to repay a loan by checking for any financial oversights you’ve made before. If you have made some financial errors, how long does this information stay on your credit report? What kinds of financial oversights are more severe than others? This blog will look at these questions so as to give you a better understanding of how these documents work.
What Do Credit Reports Entail
The following will specify the type of information that is regularly found on your credit report:
Personal Information for example 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 example, any overdue or unpaid debts that have since been repaid
Defaults and other infringements for instance missed minimum credit card repayments and loan repayments which are in excess of 60 days overdue
All credit applications
Debt agreements for example bankruptcy, personal insolvency, and court judgements
Repayment history which is probably the most significant aspect 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 feature 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 report1
Credit Report Defaults
Defaults with creditors will be mentioned on your credit report and will alter your ability to attain credit down the road, so it’s 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. However, financial institutions can only do this if the following conditions apply:
The default amount is equal to or more than $150;
You’re a ‘confirmed missing debtor’ or ‘clearout’ which implies the lender cannot contact you because you have changed your phone 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 lender must advise you of any intentions in lodging a report before doing this. In most cases, 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 Remain On My Credit Report
The majority of the time, a credit default will stay on your credit report for 5 years, but if a lending institution cannot contact you because you’ve changed your telephone number and address (known as ‘clearout’), the penalties are more extreme and the default will continue to be on your credit report for 7 years. It’s important to mention that even when you do pay an overdue debt, the default will still stay on your credit report, however the status will be updated to reflect that the debt has been paid. Every time you apply for a loan, the lending institution 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 inform you that your application has been rejected based upon your bad credit history.
As you can see, credit reports are serious documents that can substantially 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 posted on your credit report for five years. Even though there are measures to improve your credit rating (for instance paying your bills on schedule), creditors 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 on time, so if you find yourself with any financial difficulties and can’t pay your bills by their due date, get in touch with Bankruptcy Experts Wagga Wagga on 1300 795 575 for assistance, or visit their website for additional information: http://www.bankruptcyexpertsWagga Wagga.com.au