Credit default listings and how they can impact your car finance application

Have you previously been told you are not eligible for a car loan because of credit defaults, but you don’t actually understand what that means? Don’t stress, we have an easy to understand explanation as well as tips for how you can fix your credit file so you can get a car loan with us at Unicorn Auto.

What is a Credit Default?

We at Unicorn Auto have noticed that customers are sometimes in the dark as to what a credit default listing is, let alone the subsequent impacts it can bring. So, simply explained – if you leave a bill of $150 or more unpaid and overdue for 60 days, you could have a default listing on your credit report. For example, an energy bill worth over $150 that was left unpaid for more than 60 days past its due date could potentially be listed on your credit report as a default payment by the energy provider.

Therefore, this default listing is an example of negative credit history, which will damage your credit score, leaving a default on your file for five years. A bit rough, yes, but there are ways you can improve your credit score as well as prevent future defaults occurring.

When does the overdue payment become a credit default listing?

As we mentioned, normally after 60 days of the payment being overdue. Generally, providers will take a number of steps to get consumers to pay their bill prior to listing the payment as a credit default. First notice can come immediately after the bill being overdue, the second notice can come 30 pays after the first, and the third notice can come 14 days after the second. It is here that the provider can inform a credit reporting body and the default will be listed on your report.

Will I get notified when I get a credit default listing?

No, it is not common to be notified once the default listing has occurred. Therefore, to know whether you have a default listing, it can be recommended that you obtain a credit check from Equifax, a major credit reporting body in Australia.

What exactly gets listed on my credit report?

Your provider will report the following information to your credit reporting body in relation to your default listing:

  1. The credit provider’s name and type of account
  2. The amount listed as a defaulted
  3. The date the listing is due to be removed from your report (5 years’ time)

Once paid, does a default listing get removed from my credit file?

Even if you pay the outstanding amount after the default listing is on your report, the amount can’t be changed to reflect any payments you have made since the default was issued. Instead, the creditor will advise the credit reporting body to have the listing changed to ‘paid’, but this does not necessarily mean that the default has been removed.

How can I avoid a credit default listing?

Obviously, the easiest and most effective means of avoiding default listings is to pay your bills in full and on time. This can be done by setting up direct debits, or scheduling your repayments regularly in line with your payday.

Another common issue is not keeping your contact details such as your address, phone number or email up to date with your providers. This can result in a bill being delivered to an old address and you accidentally miss a payment.

Keep on top of your credit commitments and only apply for credit when you really need it.

If you are struggling to make ends meet and it’s affecting your ability to make payments on bills or repayments on loans, your providers will have hardship options available that you can apply for.

What are the impacts of having credit defaults?

Credit providers analyse your credit report as a measure of your credit-worthiness to ultimately determine whether you are responsible with credit. Damaged credit files with default listings will be viewed less favourably by many credit providers, as it shows that you have failed to pay off debt in the past, increasing the level of risk associated with you as an applicant.

Basically, you may find it difficult to find credible lenders when in search of credit. That’s where us at Unicorn Auto come in. We specialise in bad credit finance and have a panel of over 30 lenders meaning if anyone can help you get a car loan, it’s us.

How can Unicorn Auto help me get a car loan?

We will access your finance application and do pre-approval. If you are not immediately eligible, we will coach you with regular emails on what you need to do in order to get approved for a loan. For more than four credit defaults, you just need to keep on top of getting your defaults into payment plans and be consistently making payments over a three-month period. This will show the lenders you are trying to pay off your loans, so they can see you would be reliable for a new loan. You can find out what these defaults are for by getting a copy of your credit file online. We suggest going through Equifax to check your credit file as this is the most viewed credit file from lenders. Once you have organised your payment plans and have consecutively been paying them off for three months, we can try again for finance approval.

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