We've probably all received reminders about late bills, but ignoring them can hurt your chances when applying for credit again in the future, including your mortgage.
Your credit file is usually generated the first time you apply for credit, such as when signing a mobile phone contract. The service provider contacts a credit bureau like Veda Advantage or Dun & Bradstreet to see what information is stored on you, and a new file is created containing your name, birth date, drivers' license number, employer's name and current and previous addresses. Every future credit application is then checked against this.
Your credit file also stores any significant problems you have had meeting your credit obligations. Failure to pay within 60 days can lead the credit provider to commence recovery action, which is recorded as a default.
According to Veda Advantage's customer service manager Rebecca Barbour this default remains in place for five or seven years, and is considered when determining if you are a good credit risk. Your credit file is however available for you to view and you have the right to dispute any entries that you do not agree with. Credit agencies are required to give a copy of your credit file to you for free.
“When you are going for something as important as a mortgage, I would absolutely advise you to get a copy of your file,” Barbour says. “Do it early, so there aren't any surprises for you.”
The best way to avoid defaults is simply to pay your bills on time. Consider using automatic deductions from your bank account to prevent missed payments and always maintain an organised budget.