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A credit report is a specific document that details your history with creditors and has a considerable effect on your future financial capabilities. Having a ‘good’ credit report is normal as long as you pay your bills and debt repayments on schedule. However, skipping a repayment on a bill or debt repayment can cause serious problems if you wish to secure credit again down the road. Recently, the rules have been adjusted to place a greater focus on affirmative history like paying your bills on schedule, but overwhelmingly, credit reports are used as a means for lenders to evaluate your capabilities to repay a loan by looking for any financial oversights you’ve made previously. If you have made some financial oversights, how long does this information remain on your credit report? What types of financial oversights are more serious than others? This article will take a 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 provide the type of information that is traditionally found on your credit report:

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

Joint applicant details if you’ve obtained credit jointly with another person

Credit card information

Arrears brought up to date, for example, 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 over 60 days overdue

All credit applications

Debt agreements like bankruptcy, personal insolvency, and court judgements

Repayment history which is likely the most important 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 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 lenders who have previously requested a copy of your credit report

Credit Report Defaults

Defaults with lenders will be noted on your credit report and will alter your potential to receive credit down the road, so it’s vital to comprehend what constitutes a default on your credit report. If you cannot make a payment on a debt, your financial institution has the capability to report your debt to a credit reporting agency who will then record this information on your credit report. But, lenders can only do this if the following prerequisites 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 creditor must inform you of any intentions in lodging a report prior to doing this. Traditionally, your contract or service agreement will outline when a default can be made and reported to a credit reporting agency.

How Long Does A Default Stay On My Credit Report

Most of the time, a credit default will remain on your credit report for 5 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 severe and the default will remain on your credit report for seven years. It is necessary to keep in mind that even when you do repay an overdue debt, the default will still remain on your credit report, but the status will be updated to show that the debt has been settled. Any time you apply for a loan, the lender 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 founded on your bad credit report.

As you can see, credit reports are very serious documents that can notably impact your borrowing capacity and financial flexibility. In many cases, credit reports are either a pass or a fail, so any default, despite how big or small, will be recorded 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), 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 in a timely manner, so if you end up with any financial troubles and can’t pay your bills by their due date, speak with Bankruptcy Experts Tweed Coast on 1300 795 575 for assistance, or visit their website for additional information: http://www.bankruptcyexpertstweedcoast.com.au

Sources:

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