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 comprehensive document that contains your history with creditors and has a notable effect on your future financial capabilities. Having a ‘good’ credit report is normal so long as you pay your bills and debt repayments on schedule. However, overlooking a repayment on a bill or debt repayment can cause significant issues if you need to secure credit again down the road. Not long ago, the rules have been altered to place a greater focus on desirable history like paying your bills on time, but overwhelmingly, credit reports are used as a way for creditors to examine your capabilities to repay a loan by looking for any financial oversights you’ve made previously. If you have made some financial mistakes, how long does this information remain on your credit report? What kinds of financial mistakes are more drastic than others? This post will explore these questions to give you a better understanding of how these documents work.

 

What Do Credit Reports Entail

 

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

 

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

Joint applicant details if you’ve secured credit jointly with another entity

Credit card information

Arrears brought up to date, for example, any overdue or unpaid debts that have since been settled

Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are over 60 days overdue

All credit applications

Debt agreements for instance bankruptcy, personal insolvency, and court judgements

Repayment history which is likely the most critical 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 contain information such as the due date, paid date, amount, and any partial payments if applicable

Commercial credit applications for instance 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 noted on your credit report and will affect your potential to secure credit in the future, so it’s very important to understand what constitutes a default on your credit report. If you fail to make a payment on a debt, your lending institution has the capability to report your debt to a credit reporting agency who will then note this information on your credit report. But, lending 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 means 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 financial institution must inform you of any intents in lodging a report before doing this. Typically, 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

 

The majority of the time, a credit default will remain on your credit report for 5 years, although if a lending institution cannot contact you because you’ve changed your telephone number and address (also known as ‘clearout’), the consequences are more serious and the default will remain on your credit report for 7 years. It is necessary to bear in mind that even when you do repay an overdue debt, the default will nevertheless remain on your credit report, however the status will be updated to reflect that the debt has been repaid. Any time you make an application for a loan, the loan provider will always look at 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 upon your poor credit report.

 

As you can see, credit reports are 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, despite how big or small, will be listed on your credit report for five years. While there are measures to improve your credit rating (for instance 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 end up with any financial difficulties and can’t pay your bills by their due date, speak with Fresh Start Solutions Sunshine Coast on 1300 818 575 for support, or visit their website for additional information: http://freshstartsolutions.com.au/bankruptcy-sunshinecoast

 

Sources:

 

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

 

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