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 detailed document that shows your history with creditors and has a major effect on your future financial opportunities. Having a ‘good’ credit report is standard so long as you pay your bills and debt repayments in a timely manner. Having said that, missing a repayment on a bill or debt repayment can cause substantial issues if you plan to gain credit again down the road. Not long ago, the rules have been altered to place a greater importance on constructive history like paying your bills in a timely manner, but overwhelmingly, credit reports are used as a means for creditors to assess your abilities to repay a loan by looking for any financial mistakes you’ve made before. If you have made some financial errors, how long does this information remain on your credit report? What types of financial mistakes are more severe than others? This article will examine these questions in order to give you a better understanding of how these documents work.

 

What Do Credit Reports Entail

 

The following will specify the kind of information that is generally 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 individual

Credit card information

Arrears brought up to date, such as 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 over 60 days overdue

All credit applications

Debt agreements like bankruptcy, personal insolvency, and court judgements

Repayment history which is perhaps the most vital component 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 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 lenders will be listed on your credit report and will impair your ability to obtain credit in the future, so it’s crucial to recognise what constitutes a default on your credit report. If you fail to make a repayment on a debt, your creditor has the capability to report your debt to a credit reporting agency who will then record this information on your credit report. With that being said, creditors can only do this if the following terms apply:

 

The default amount is equal to or more than $150;

You’re a ‘confirmed missing debtor’ or ‘clearout’ which means 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 lender must notify you of any intentions in lodging a report before doing so. 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

 

In the majority of cases, a credit default will remain on your credit report for 5 years, although if a lender cannot contact you because you’ve changed your phone number and address (referred to as ‘clearout’), the penalties are more serious and the default will continue to be on your credit report for seven years. It is very important to bear in mind that even when you do pay an overdue debt, the default will continue to stay on your credit report, but the status will be updated to reflect that the debt has been paid. Whenever you make an application for a loan, the lender 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 on your poor credit history.

 

As you can see, credit reports are very serious documents that can considerably impact your borrowing capability and financial flexibility. In the majority of cases, credit reports are either a pass or a fail, so any default, regardless of how big or small, will be shown on your credit report for five years. Even though there are measures to improve your credit rating (for instance paying your bills in a timely manner), lenders 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 troubles and can’t pay your bills by their due date, speak to Fresh Start Solutions Melbourne on 1300 818 575 for support, or visit their website for more details: http://freshstartsolutions.com.au/bankruptcy-melbourne

 

Sources:

 

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

 

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