What Can I Do About Unpaid Defaults On My Credit File
Just about everyone experiences financial hardship at some point in their lives. It can occur for a myriad of reasons, loss of employment, a serious medical condition which prevents them from working, relationship breakdowns where you may believe your ex-partner is making repayments when in fact they are not or a death in the family.
On other occasions, it may be as simple as someone shifting addresses and their utility or telecommunications account not reaching them. In this instance the account holder may have been unaware they have an unpaid account until they go to organise finance for purchase of a home or a vehicle.
Once you are 60 days late with a payment, a creditor has the right to lodge notice of default on your credit file.
What is a default on your credit file?
Once you borrow from a loan provider and forget to repay the debt, a default will reflect on your credit report as a negative mark. Understand how to keep this damaging mark from impacting your credit rating.
Defaulting could be the consequence of several late payments, missing out on successive repayments not really meeting your obligations at all.
Credit file listings are a warning to creditors that you have defaulted on your obligations and that you could potentially default again.
Unfortunately paying the Defaults and Judgements after the event will not remove them from your credit file. Once there is a credit impairment listed on your credit file it remains there (even if it is paid) for five years. A more serious default, a clear out can be listed for up to seven years.
How Do I Get My Credit Rating Repaired
Having an impaired credit file can make it difficult to obtain finance. Hence cleaning up your credit file can:
- provide you with a wider choice of lenders
- turn a potential decline into an approval
- reduce the rate of interest you pay on your loan
- reduce the monthly repayment you are required to make on your loan – reduce the upfront fees you have to pay to establish a loan
Set out below are the potential credit impairment listings that could be expected to be recorded on a credit file:
A failure by an individual to meet their contractural obligations where a debt has been deferred – the debt has not been repaid in accordance with the terms and conditions of the agreement.
These relate to court proceedings, as do writs. The court makes an order that one party, typically a debtor pay a debt to the plaintiff who is typically the creditor.
Court orders are public information, which credit bureaus upload to their internal databases on a daily basis.
This typically relates to a situation where a service provider issues an account to the account holder but is unable to locate the account holder because they have moved addresses.
If you are concerned that you may have a listed default, in the first instance, you should obtain a copy of your credit file from the credit bureau. There are two main credit bureaus in Australia:
– Dun & Bradstreet
Veda is the most commonly used in Australia. They can be contacted at:
You can receive an electronic copy of your file for a relatively small cost. Alternately if the matter is not urgent and you can wait 14 days for the information there is a no-cost service which you may wish to avail yourself of.
There is an additional service which notifies you of any activity on your credit file pro-actively. This would mean that if any enquiry or listing was made on your credit file you would know immediately.
If upon receipt of your credit file, you feel there is an unjust listing or there is a mistake you should contact the creditor concerned and discuss the matter with them. You need to be aware that contacting Veda directly will not assist. When listing a default they are following the instructions of the ” creditor” and they cannot remove the listing unless authorised by the “creditor” to do so.
The alternate course of action you may wish to take is to contact a credit repair organisation. Credit repair organisations are specialists in the area of having defaults removed. One avenue they peruse is to check if the correct guidelines have been followed when the creditor has listed the impairment. In Australia, there are strict guidelines which must be adhered to.
The other aspect these organisations will check is the accuracy of your credit file. Credit reports can be notoriously error-ridden.
Credit File Accuracy
Latham Moore & Associates are a consulting firm who specialise in commercial and consumer credit reporting.
They requested 58 of their subscribers to order a copy of their CRAA reports with the following outcomes:
- Eight of the 58 were told there were no reports for them. This would occur if they had not applied for any credit facilities within the last seven years
- Of the remaining 50, 39 were provided with reports
- Of these 39, 34% or a third had mistakes. These mistakes entailed: – incorrect licence numbers
- misspelt names
- misspelt street addresses
- addresses recorded that they had never lived at – incorrect dates of birth
- incorrect employment details
What can you do to prevent credit default on your credit report?
There are actually preventive steps you could make in order to avoid a default listing on your credit history:
- Always make sure you make payments on time
- You can set up an auto pay or auto debit on your account
- Create a monthly budget and stick to it
- Let your lender know if there are changes in your contact or address information
- Do not borrow more than what you can pay
- Try to keep your debts at a minimum and do your best to pay it each month
- If you are experiencing hardship, let your lender know as soon as possible.
Are Australians Facing Financial Difficulty
While Australia is seen internationally as a well to do country financially, currently ranked 13th in the world, down from 15th in 2000 according to www.aifs.gov.au.institute/pubs/fact sheets 2011, there is growing sentiment that these figures mask the difficulties being experienced by many Australians.
According to the Salvation Army, in 2010 one in five Australians experienced financial difficulties and could not pay their bills, including their mortgages. 55% of those surveyed had experienced ongoing stress for in excess of two years.
Katrina Ballymore from News Limited reported in the Age on September 19, 2011, that one in three generation “x” we’re struggling to make ends meet. Her article drew heavily on a survey conducted by Rabo Direct Bank in which they recorded that 40% of generation “x” felt their financial situation had declined over the previous year and that a third of them did not have an emergency fund which would support them beyond two months. More concerning was that a third of them also stated they live pay to pay, struggling to make it through to their next payday.
Generation “x” makes up 40% of the Australian population.