10 questions about defaults answered

June 18, 2019 By: alphafinance0 comments

Many people still don’t fully recognise how defaults can impact their financial situation. It may seem scary at first, but understanding them can help you overcome the challenges they pose and deal with them to your advantage. To provide more information, we take on some of the burning questions people have about dealing with defaults.

What is a default?

A default is a consumer credit amounting to more than $150 and late by more than 60 days. These debts range from credit card, personal loans, and even utility bills. If you have a payment due that is less than $150 and is not overdue after 60 days, then it is unlikely to be listed as a default. However, if you don’t pay, your provider may register this as a debt.

Here are some of the most common questions people asked about defaults:

1. What are the types of defaults?

Here are some of the most common defaults people get:

• Lender defaults – A lender default happens when you take out a loan and fail to make repayments on time. Whatever the reason, you will be required to provide proper paperwork stating the valid reason why you were unable to pay your lender on time, especially if you are looking to apply for another loan or car finance.

• Utility defaults – It’s one of the most common defaults. Whether it’s your electricity, water, or phone bill, failing to pay for it for months at a time can lead to a utility default. Lenders will require you to handle and resolve these issues first before considering you.
• Court judgments or writs – Court judgments happen when you fail to settle loan obligations with a financing company. Other ways to get a court judgment is the failure to pay alimony or child support. It is impossible to get a loan with writs over your head, which is why it is recommended to settle everything before even thinking about a new loan.

2. How long will a default stay on my record?

Once registered, defaults stay on your record for five years, even after they are settled; however, your payments will also show on the record. It is essential for some lenders to see that you’re making payments towards your defaults for them to approve your loan or finance.

3. How do I know if I have a default?

Creditors cannot automatically register a default when you miss a payment. Your creditor or a debt recovery agency will contact you requesting that you make the payment as quickly as possible.
If you fail to respond or settle the matter, the lender can report you to a credit reporting body like Illion or Equifax. So, be aware and track your payments to avoid missing one. You can also get in touch with the lender and make mutual arrangements to avoid getting a default.

4. Can I get finance or a loan if I have a default?

Yes, there is still hope. If you do manage to settle your defaults, lenders will be more than willing to give you a chance.

5. Can I hide my default from the bank?

No. You cannot hide defaults. Your credit profile contains a historical record of your financial background, so even if you lie during your application, they will learn about your defaults as soon as they check your profile.

If you have defaults, be upfront and tell about it to the lenders when you are applying for finance. Being transparent puts you in a good light and could increase your chances of approval.

6. Can I get a free copy of my credit report?

Yes, there are reporting agencies that can provide a free copy of your report like Credit Simple. They can provide:

• Better preparation before sending your loan application. By knowing your credit score, you can identify beforehand which lenders are likely to approve your application, lessening your chance of rejection.
• Make improvements to your credit reputation. When you know what’s on your report, you can improve your finances and settle your defaults to make your profile more presentable to lenders.

7. What if I find an error on my credit report?

Always go over your reports carefully. Check the loans and debts listed and make sure that you actually took them out. Try keeping track of all the receipts and any other documents related to your loans and debts.

You can make changes to your report or add comments as needed. It is free to make amendments to your report as required, but it’s only possible if the listing in question can be proven to be inaccurate or out of date. For example, some of the common mistakes on reports include report errors such as:

• Incorrect credentials, e.g. your home address or date of birth
• Incorrectly listed debt

These mistakes are easy to resolve. All you need to do is get in touch with the reporting agency and inform them of the error. However, there are instances where fraudulent activity such as identity theft occurs. If you discover potential identify theft on your report, it’s best to report it to the relevant authorities as soon as possible.

To prevent identity theft, follow these simple steps:

• Never give personal details to anyone
• Check your credit reports and bank statements carefully
• Shred any document with personal information before throwing them in the bin.

With this new knowledge, you can improve your current credit standing. However, prevention is always better than cure. So, make sure to pay your debts on time every time to avoid the hassle of a default.

• debt
• defaults