Can I Have A Default Listed On My Credit Report For A Bill I Never Received?
Can my credit file show a default for a bill I never received? This is an excellent question that is becoming increasingly common. In most cases, the answer to this question is “yes”. Before we discuss why people get defaults on their credit reports, let’s look at how credit reporting works.
An overview of how credit reporting works
Credit reporting is the process of collecting and storing information about your credit history and use of credit. In turn, lenders and other organizations use it to determine your creditworthiness.
How does your information end up in a credit report?
Credit reporting agencies (Experian, Equifax, and Illion) collect and store information about you. They get it from people who know you. This includes:
- lenders who have lent you money
- other companies, such as telecommunication or utility providers, have provided you with financial products and services. Such as insurance or paying a portion of your account (an overdue account amount).
Credit bureaus or lenders may summarise your credit record into a credit score. Your credit score compares you to other borrowers and evaluates your creditworthiness to assist lenders while evaluating who to lend to and at what interest rate to charge.
Credit companies will examine your credit record when you seek a loan or credit. This document, created by a credit reporting agency, details your credit history – from the number of times you asked for credit and the kind of loans you obtained to your repayment history, defaults, and the amount of debt you now owe.
Credit providers will use your credit report or credit score, any information you submit throughout the application process, and other information to decide whether they will lend to you, the amount they will lend, and the conditions on which they will lend.
What is a credit file default?
A default occurs when a credit arrangement is breached. If you can’t pay or don’t pay enough, your collector may issue you a default find. The default might damage the credit file.
Types of bad markings
Defaulted payments
Late payments occur 30, 60, or 90 days late. An odd 30 or 60-day late payment isn’t too serious. You don’t want numerous late payments or late payments on every account.
In the same month, skipping one payment cycle for all accounts might cause a score to plummet by 150 points or more.
Late payments of 90 days or longer hurt your credit score, and successive late payments hurt your score even more since each late payment weighs more.
Payments may be reported up to 120 days late, nearly as harsh as charge-offs and collections. Late payments are notified to the credit agencies after 30 days and may last up to seven years.
Chargebacks
A charge off occurs when a creditor cancels an overdue obligation. This usually happens after 180 days of non-payment.
Charge-offs negatively influence your credit and, like other negative items, may last seven years. If you default on a payment, your creditor might sell it to collection agencies, hurting your credit.
Creditors see a charge off as a clear indication that you are not fiscally responsible in the past and cannot be relied upon to do so in the future.
Creditors are reluctant of offering you additional loans or credit lines because they regard you as a financial danger. If you qualify, your interest rate may rise. Your current creditors may react by increasing your interest rates.
Liens on taxes
Tax liens are usually the consequence of unpaid state or federal taxes. The IRS can place a lien on your property to cover unpaid taxes. Tax liens prevent you from getting new credit lines or loans because the government owns your property.
That is, if you default on certain accounts, your creditors must follow the IRS to collect.
Unpaid liens can linger on your credit reports indefinitely. However, they can stay on your reports for up to seven years once paid. Liens, like judgments, are public records and therefore subject to strict reporting regulations.
Court’s judgements
Judgments are public records, also known as civil claims. Non-payment of debts might result in court action. Creditors or collection agencies may sue.
Notably, a court judgment is made against the debtor, which is reported to credit bureaus. This, like most negatives, can be reported for seven years.
Judgments are another sign of non-payment. Suits are time-consuming and costly, so creditors may wish to avoid them. A judgment can affect more than just credit. A judge may allow creditors to garnish a debtor’s wages, causing serious financial problems.
Collections
Most Australians have at least one collection account. Over half of these accounts are medical, but unpaid credit cards, loans, utilities, and parking tickets can also be sold to collections.
Unpaid debts are sold to third parties by the original creditor resulting in collections. They damage your credit and can stay on your reports for seven years.
Collections on credit reports can raise red flags for potential creditors, leading them to believe you won’t pay your debts.
Foreclosures
When a homeowner cannot make payments, a mortgage lender will file for foreclosure. A lender typically files for foreclosure when a homeowner is three months or more behind on their mortgage payments.
When a lender chooses to foreclose, they file a Notice of Default with the County Recorder’s Office. If an owner misses payments, they are out from their home, and the foreclosure is reported to the credit bureaus.
Bankruptcies
Bankruptcy wreaks havoc on credit. Those who file for bankruptcy have too much debt and not enough money to pay it. They probably have long-overdue accounts and sometimes income loss that prevents them from paying their bills. Huge medical debt can cause bankruptcy.
Filing for bankruptcy is a tough choice that can impact your credit for seven to ten years, depending on the type. When a bankruptcy is filed, most debts are discharged, and the debtor is released from most obligations (there are some exceptions). This option can help people get out of debt, but creditors don’t like it because it implies a person won’t pay.
Repossessions
A repossession is a loss of secured property. Secured loans require collateral, like a car or a house, and the lender loses when the borrower defaults. When this happens, the lender will usually auction off the collateral to cover the remaining balance, though not always.
If there is a balance, the creditor may sell it to collections. A repossession hurts credit because it shows a debtor’s inability to repay a loan. A repossession usually follows a string of late payments, lowering a credit score significantly.
How does a default happen?
A credit file will reflect a default if you cannot sustain payments on a free account. For instance, on a utility bill or a mobile phone contract.
If you cannot make repayments, your collector may contact you and give a default notice, informing you that the contract you signed is broken and that the accounts will default if you are unable to make the repayment.
How can I identify if my credit file has a default?
Before reporting the payment as a credit default, providers will take a variety of methods to get clients to pay their accounts.
The first notification may be issued immediately upon payment default, advising you of the situation and demanding payment of the overdue amount.
The second notice must be given within 30 days of the first, warning you that if you do not pay the late amount, the creditor will send you a notice saying that the whole debt is now due and demands payment.
After a minimum of 14 days after the second notification, the energy supplier may notify a credit reporting agency, which will record the default on your credit report.
Notification of the default listing is not usual. Therefore, to determine if you have a default listing, it is advised that you acquire one credit report for free per year from each of Australia’s three main credit reporting agencies: Illion, Experian, and Equifax.
What information does my credit report contain?
In connection with your default listing, your provider will give your credit reporting body the following information.
- The name and type of account of the credit provider
- The defaults amount specified
- The date on which the listing in your report is scheduled to be deleted (5 years from now)
Why did I get a notice of default?
A default notice is a letter notifying you of late payment and seeking payment of the outstanding balance.
This is a letter from your creditor informing you that your account is set to default due to your payment inability.
Any late payments must be made within two weeks after receiving the default notice. If you are successful, your account will continue to operate normally. If you are unable to make up for the missing payments within this time period, your account will default.
A default notice is often delivered after three to six months of missing or paying less than the entire amount.
Is it OK for me to disregard the default warning?
You should not disregard the standard notice.
You should carefully study your default notice, as it will include what the bank requires of you, the time frame within which you must comply, and other pertinent facts concerning your situation.
If you get a default notice, you will still have a limited amount of time to resolve your payment issues with your bank. But if you can’t work out a deal with your bank, they may initiate legal proceedings against you.
How serious is a default notice?
No one likes to get a default notice – but the essential thing is to act on it as quickly as possible since the effects of not dealing with a default notice may be far greater.
If you don’t respond to the default notification within the 14-day deadline, your credit arrangement will be cancelled, and the default will be reported on your credit history for six years.
And it doesn’t stop there. Additionally, your creditor will be able to demand that you repay the whole debt, or they may initiate legal action against you.
Your creditor may transfer the account to a debt collection agency, which will pursue the debt relentlessly by contacting and sending letters until the obligation is paid.
I have received a default notice. Can I be taken to court?
Yes, if you do not react to a default notice, your creditor may pursue you in court. You’ll know they’ve chosen to sue you when your creditor sends you a letter of claim. The following should be included in the letter of claim:
- The total amount you owe, including any interest.
- A form for confirming that you owe the loan.
- Financial statement in the conventional format.
- A fact sheet outlining your rights and the appropriate course of action.
- Organisations that may assist you if you are experiencing financial difficulties.
If you continue to fail to react to the letter of claim, court proceedings will proceed, and the next communication you will get about them will be in the form of a claim pack sent straight from the court.
How long is a default appear on your credit report?
Defaults often remain on your credit history for five years. It’s critical to understand that after you pay a default, it will stay on your records for the entire five years, although it will be marked as “paid.”
This five-year regulation applies to the majority of minor credit infractions. Court writs, which remain on your record for four years, and “clearouts,” which remain on your record for seven years, are the two significant exceptions.
A clearout is a more severe credit violation in which a person owes money to a credit provider but has left, or seems to have left, their previous residence without settling the bill or notifying the credit company of their new location.
Other more significant credit infringements, such as certain forms of bankruptcy, may remain on your record for up to seven years.
How much damage does a default cause to your credit score?
A default will strike 350 points off your credit score and will very certainly keep it low for an extended period. Late payment will subtract around 80 points from your credit score, while a County court judgment would subtract approximately 250 points from your credit score.
Is it true that deleting a default helps your credit score?
Yes, when a default is gone from your credit file, your credit score will improve; however, this depends on whether you have a default or any defaults on your credit file.
Frequently, individuals may have several defaults on their credit reports because they may have been going through a difficult period and could not satisfy any of their financial commitments.
How can I minimise a credit default listing?
The fastest and most effective strategy to avoid default listings is to pay your invoices in full and on schedule. This is possible by setting up direct debits or arranging your repayments regularly following your paycheck.
Stay on top of the contact data you supply your creditors. Ensure that your address is always up to date when you move to a new residence, whether for your internet, phone, electricity, or television provider.
If you mistakenly miss a payment, you will get the first and second reminders in time for you to make the arrangements required to pay the late amount before it becomes default listed.
Be careful of your credit obligations and only apply for credit when you need it.
If you are struggling to make ends meet and it’s hurting your ability to make payments on bills or repayments on loans, your providers will have hardship alternatives available that you may apply for.
How can I erase the negative mark?
The best way to find out how to remove negative marks from your credit reports is to speak with a credit lawyer first.
Credit lawyers are specialists in helping people fix their credit problems, and one of their specialties is removing negative marks from credit reports. The greatest thing to do is to speak with a lawyer who can advise you right now on how to fix your problem.
Learn More: How to Get Defaults Remove From Your Credit Report?
Conclusion Paragraph
I hope you found the article helpful. If you are in this situation and you discover any default on your credit file, the best solution is never to contact the debt collector directly without first speaking with a consumer credit lawyer. Why? Because, regardless of how polite and nice they may sound, they simply want your money. But I can’t explain enough that this is not the way to go.
These debt collectors use fear to get individuals to pay their debts. Still, by contacting Australian Credit Lawyers first, you increase your chances of regaining control of your situation and finding greater peace of mind to start your day.