G'Day
Interesting that this thread has popped up again!
Just a reminder - in Australia we do not have a Credit Rating, we have only a Credit Record
Also, a credit provider registering a default is not 'black listing'. There is no such thing as 'black listing' so not worth a second thought.
Small defaults - and a default is completely different to being in arrears - can be considered to be serious defaults if they have not been paid for more than two years.
A recent customer of mine thought that he had cancelled and completely paid out his mobile phone contract about four years ago.
About two years ago, he was sent a letter of demand from a Mercantile Agency which had bought the debt. The debt was now twice the original amount. The Mercantile Agency insisted he pay the account by credit card, even though he told them he did not have a credit card and would they please send him an account so that he could pay it at the Post Office.
He received nothing and time went by.
About twelve months ago he got a personal loan from his local bank. No mention was made of any defaults listed on his credit record.
While we were preparing his home loan application, he rang Baycorp to organise a copy of his credit file, and was told that he had a default of nearly $700 outstanding. Interest had been accruing on the unpaid debt for two years.
He paid the $700, and we prepared the application thoroughly. The lender did not have a problem, but interestingly enough, the Deposit Bond company did. The default was over their limit. However, as the bond was for a short term bond, loan approval had been granted and the customer is a First Home Buyer the Deposit Bond was issued.
Every lender has a working policy on defaults. These policies change frequently but the most important factor is to pay the debt as soon as you are aware of it, and provide a comprehensive written explanation of the event plus a copy of the receipt to accompany your loan application. The defaults which most seriously concern lenders are those involving credit facilities such as loans and credit cards.
Increasingly, lenders are requesting explanations for all credit enquiries within the previous two years, unless the enquiries are represented by accounts submitted with the loan application. Recent applications for the same event (purchase / refinance the same property) may or may not require an explanation.
Of course, the very most important factor is to not have any defaults at all, but sometimes bills do get overlooked. At very worst case scenario, you move your application from an 'A' list lender to a 'B' list lender
Where there is a will there is a way. Even very awful situations can usually find a lender, after all this is mortgage secured lending. It is the property which is securing the loan, the borrower is only paying for it!
Cheers
Kristine
