With active credit reporting now, there is more ways your credit can be affected by your repayment behaviour. Both good and Bad.
With active credit reporting, if you have a loan or credit card, it will now show on your credit report, with a 2 year history of payments. There is now nowhere to hide if you make a late payment, it shows on this report. This could prevent you from borrowing money from a Bank or Finance company. If there is a good reason or explanation and it has only happened once you may be able to explain it away. If there are several it will get harder. Lenders will want 2 years of clean, on time history for a good report and a favourable Interest rate. This automatically resets as you make your payments, so 2 years of on time payments after you have been late and it is clean again.
The more serious Default on a credit report will take 5 years to drop off, if it has been remedied. This will mean they haven’t been able to come to an arrangement with you to catch up payments and may have passed your Debt on to a collection Team or sold your Debt to a Debt Collector. This will take longer to recover from. Each default will drop off 5 years after it has been put on your credit report. But beware, if you have not addressed the situation with a payment plan, Debt Agreement or Bankruptcy, a Debt collector can put a new Default on each time they pursue you for the Debt.
By taking action like a Debt Agreement or Bankruptcy no further defaults regarding those Debts can be put on your report. This will allow your credit report to reset in 5 years. Taking no action will probably see your credit report stay bad for the foreseeable future.
You cannot have a default removed if it has been put there correctly. But if you have a default on your name that is not correct, or put there without due process, then AFCA the Financial Ombudsman can help have it removed.
Debt Agreement will show an exclusion of Credit Score. It will automatically drop off at the 5 year 1 month mark, provided it has the payment plan has been completed. You will then have a Fresh Start. It will change to show you have completed the Debt Agreement if you have paid it out earlier, but the exclusion of a Credit Score will remain till 5 years has passed. If your Debt Agreement is not paid or you enter into a Bankruptcy it will restart the 5 years.
In the Case of a Bankruptcy that automatically discharges at 3 years, the exclusion of a Credit Score will stop at the 5 year 1 month mark. If the Bankruptcy runs longer it will be 2 years from whenever you are Discharged.
However once you have completed the Debt Agreement or been discharged from Bankruptcy, you will be able to approach specialist Lenders for Home Loans or Car Loans. Contact Money Buckets for Help in this situation.
On the positive side, your credit score will keep increasing with continued good payment.
There are some Loans that will affect your credit regardless if you pay them on time. Quick payday style Loans and other High Interest loans are seen as Bad Financial Decisions and will adversely affect your Credit Capability. Be careful of Afterpay credit as well.
Having too many cards or Loans will not be looked upon as a good thing either and may prevent you from borrowing anymore.
Every time you make an application for a loan or credit card your score will drop. So do not just apply to multiple Lenders at once to see what can be done, this has prevented many people from obtaining a Loan even though they were only shopping around.
Money Buckets can check your credit report and asses your loan prospects without affecting your credit report. Contact us now to discuss.
Customer Enquiries: 1800 825 010
Admin Office: 0243696287
Post: PO Box 6100, Kincumber, NSW, 2251
Money Buckets ™ is a Trademark of Starlight Home Loans T/as Fast Debt Help
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The Rite Place Pty Ltd trading as Debtrite