Bankruptcy Impacting Your Credit Report
A credit report is a detailed document that shows your history with creditors and has a notable effect on your future financial capabilities. Possessing a ‘good’ credit report is conventional provided that 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 considerable issues if you need to secure credit again down the road. In recent times, the rules have been altered to place a greater focus on favourable history such as paying your bills on schedule, but overwhelmingly, credit reports are used as a means for creditors to ascertain your abilities to repay a loan by checking for any financial mistakes you’ve made previously. 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 post 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 detail the kind of information that is typically found on your credit report:
Personal Information such as your name, DOB, address 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 paid
Defaults and other infringements such as missed minimum credit card repayments and loan repayments which are greater than 60 days overdue
All credit applications
Debt agreements like bankruptcy, personal insolvency, and court judgements
Repayment history which is likely the most meaningful 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 include information such as the due date, paid date, amount, and any part payments if applicable
Commercial credit applications for instance 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 detailed on your credit report and will impair your ability to obtain 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 ability to report your debt to a credit reporting agency who will then document this information on your credit report. However, loan providers can only do this if the following rules 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 contact 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 advise you of any intentions in lodging a report before doing this. Often, 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
For the most parts, a credit default will stay on your credit report for 5 years, although if a financial institution cannot contact you because you’ve changed your phone number and address (known as ‘clearout’), the consequences are more serious and the default will remain on your credit report for 7 years. It’s important to note that even when you do repay an overdue debt, the default will nonetheless remain on your credit report, however the status will be updated to reflect that the debt has been settled. Any time you apply for a loan, the creditor will always evaluate your credit report first and if there are any defaults, the loan provider can reject such loan applications. If this is the case, the lender must notify 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 significantly impact your borrowing capacity and financial flexibility. The majority of the time, credit reports are either a pass or a fail, so any default, despite how big or small, will be detailed on your credit report for five years. Even though there are measures to improve your credit rating (for example 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 in a timely manner, so if you end up with any financial troubles and can’t pay your bills by their due date, reach out to Bankruptcy Experts Melbourne on 1300 795 575 for help, or visit their website for additional information: http://www.bankruptcyexpertsmelbourne.com.au