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Credit Default
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Credit Default in a Nutshell
Do you know what a credit default is? Some people readily say that if they miss their payments on their credit card bills, they have a credit default. That’s not quite right as it doesn’t give you the whole picture of what it is.
A default is a financial term referring to any credit agreement that’s been broken. A credit default therefore is the failure to pay an expected debt, like credit card repayments, power charges, mobile phone bills, etc.
There are two categories in which lenders identify credit defaults. One is consumer credit default, and the other is Credit Default commercial credit default. A consumer credit default refers to a person’s debt equal to or more than $150 and has remained unpaid for more than 60 days. A commercial credit default refers to a business’ debt of $100 or more and has remained unpaid for more than 60 days.
Creditors usually send out two notices to your last known address before they can report a customer credit default. The first notice is sent out as soon as the payment is overdue, requesting that you pay it. The second notice is sent out a minimum of 30 days after the first notice, informing you that the debt may be reported to a consumer credit reporting agency. A minimum of 14 days after the second notice was sent out, the creditor can inform the credit reporting agency.
Impact of a Credit Default
When a credit default shows up in your credit report, it will impact your credit score and you will have a difficult time, or it would be nearly impossible for you to obtain a credit or have your loan approved. Also, the default will remain in your credit report for five years.
Even after you’ve paid off the default, its status will only just be updated to paid. The default is still there because of the fact that it was an overdue debt to begin with.
Let us help you determine if you have a credit default or perhaps an error in your credit file that is affecting your credit score. Let Bon Voyage’s expertise work for you. Our vastly experienced team can easily identify errors in your credit file, and we can make a case to get these removed.