If you are struggling to manage your debts and are on the verge of defaulting on your loans, it’s important for you to know the definition of a default and how defaults are listed on your credit report. You also need to know if you have committed a serious credit infringement during your default because they are different cases and are reported differently in your credit report.
In this post, we will discuss key differences between a Default and a Serious Credit Infringement in terms of what they are and how they are reported on your credit report.
What is a default?
A default simply means that you failed to repay your due bill or loan instalment. Defaults can hurt your credit score and are reported on your credit report as well. Legally, a default can only be listed on your credit report if it meets the following three conditions:
- The unpaid amount must be at least $150.
- The unpaid amount must be overdue by at least 60 days.
- The credit provider or lender must have sent you two written notices for paying the overdue amount. The first notice is sent as a reminder for repaying the overdue amount, while the second notice is sent as a warning for listing a default in your credit report if you don’t pay the overdue amount. The two notices can’t be sent simultaneously as there must be a gap of at least thirty days between them.
After 14 days from the date the second notice was sent, the credit provider can report you to the credit reporting bureau and they may then list the default on your credit report.
How is the default listed on your credit report?
A default listed on your credit report contains the following information:
- Name of the credit provider and the type of loan
- The amount for which you have defaulted
- The current status of default (paid, settled, unpaid)
- The date on which the listing will be removed from your report. You should keep in mind that default stays on your credit file for five years from the date it was listed.
Can you remove the default from your credit report?
A default can only be removed from your credit report if someone else’s default was mistakenly entered in your name. If the default was correctly entered it will remain on your credit report for five years, regardless of whether you have paid it or not. If you pay the overdue amount, the status of the default will be changed to “Paid” but will continue to show on your report. If the credit provider waives off the remaining amount, the status will be changed to “Settled” but the default will remain on your report.
What if you request hardship assistance?
If you are struggling to pay off your due loan amount, you can seek hardship assistance from your credit provider. Hardship assistance is a written notice, requesting the lender to enter a repayment arrangement due to difficulties faced by the borrower in repaying the loan. If you have sent a written request for hardship assistance to your lender, they cannot legally list a default until they send you a written reply for your hardship request. However, if you have not responded or been unable to enter into hardship assistance within 14 days of sending you the written response to your request, the lender can then legally request for a default to be listed.
What is a serious credit infringement?
You have a responsibility to inform your credit provider or lender if you move to a new home and change your address.
A serious credit infringement refers to a situation when you have defaulted on your payment and the lender has been unable to contact you at your last known address for six months. When the lender is unable to contact you at the address you provided, it is considered a serious credit infringement, and it is assumed that you have no intention of repaying the debt.
However, before recording a serious credit infringement on your credit report, the credit provider must document that several unsuccessful attempts have been made to contact you via telephone, physical mail, electronic mail, physical visit to your last known address, and any other means of communication you may have provided.
How long does serious credit infringement stay on your credit report?
A serious credit infringement stays on your credit report for seven years. Even if you pay the default, the serious credit infringement cannot be removed, although it will be converted into a default, which will then stay on your record for five years. However, the repayment history and overdue account will still appear in your credit history. Serious credit infringement can severely hurt your credit score and spoil your credit report, which is the reason why you should avoid it.
What information is recorded on your credit report if you have a serious credit infringement?
A serious credit infringement on your credit report usually contains the following information:
- Name of the credit provider who recorded the listing.
- Unpaid amount
- The date on which the listing was recorded
- Name of the debt collector if the debt was sold to a third-party debt collector.
- The current status of default (paid, settled, unpaid)
How can you avoid a serious credit infringement and default?
As you now know, a serious credit infringement occurs after you are inaccessible to your credit provider and stop paying your due loans. This can be because you changed your residential address or other communication means without informing your lender. So, to avoid this situation, you should always ensure your credit provider or lender has your up-to-date contact information, including your residential address and that you inform them as soon as possible of any changes.
If you want to avoid a default, you can consider setting up automatic repayment or direct debits from your bank account on a set date every month. Alternatively, if you are struggling with repaying your loans, you can contact your credit provider and ask to restructure your debt or to alter your debt terms so that your repayments are more affordable. There are plenty of other money management options you can adopt to streamline your finances and improve your ability to repay debt.
Defaults and serious credit infringements are negative listings that can severely reduce your credit score. The default stays on your credit report for five years, whereas a serious credit infringement stays on your credit report for seven years. However, if you pay the default amount mentioned in the serious credit infringement, the listing will be converted to a default and will appear on your report for five years instead of seven years.