August 2, 20170

What Stays On Your Credit Report And For How Long?

Posted by:Charles Bosse onAugust 2, 2017

A credit report is a specific document that contains your history with creditors and has a notable effect on your future financial abilities. Having a ‘good’ credit report is standard so long as you pay your bills and debt repayments on time. On the other hand, skipping a repayment on a bill or debt repayment can cause serious issues if you plan to acquire credit again in the future. In recent times, the rules have been changed to place a greater importance on positive history like paying your bills in a timely manner, but overwhelmingly, credit reports are utilised as a way for lenders to ascertain your capabilities to repay a loan by checking for any financial mistakes you’ve made in the past. If you have made some financial mistakes, how long does this information stay on your credit report? What kinds of financial mistakes are more serious than others? This blog will investigate these questions so as to give you a better understanding of how these documents work.

 

What Do Credit Reports Consist of

 

The following will detail the type of information that is usually found on your credit report:

 

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

Joint applicant details if you’ve received credit jointly with another individual

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 example missed minimum credit card repayments and loan repayments which are over 60 days overdue

All credit applications

Debt agreements like bankruptcy, personal insolvency, and court judgements

Repayment history which is perhaps the most vital 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 contain 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 lenders will be listed on your credit report and will have an effect on your capacity to secure credit down the road, so it’s important to comprehend what constitutes a default on your credit report. If you fail to 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, financial 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 indicates 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 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 notify you of any intents in lodging a report prior to doing this. Frequently, 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

 

The majority of the time, a credit default will remain on your credit report for five years, although if a creditor cannot contact you because you’ve changed your contact number and address (referred to as ‘clearout’), the penalties are more harsh and the default will stay on your credit report for seven years. It is essential to keep in mind that even when you do repay 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 repaid. When you apply for a loan, the financial institution will always assess 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 notify you that your application has been rejected based on your poor credit history.

 

As you can see, credit reports are very serious documents that can greatly impact your borrowing capacity and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, irrespective of how big or small, will be noted on your credit report for five years. Although there are measures to improve your credit rating (for example paying your bills in a timely manner), 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 challenges and can’t pay your bills by their due date, reach out to Fresh Start Solutions Hobart on 1300 818 575 for help, or visit their website for additional information: http://freshstartsolutions.com.au/bankruptcy-hobart

 

Sources:

 

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

 

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