What are the new credit reporting rules for financial hardship?
Falling into financial hardship and being unable to meet the repayments on loans and debts can be a challenging time - but it’s quite common. In fact, almost 30% of Australians are experiencing financial hardship.
But it doesn’t just take an emotional toll, it can often impact your credit report,. However, new laws in effect from 1 July 2022 will change this.
What’s my credit report?
A credit report is a record of your credit history that lenders can access when assessing whether to approve an application for finance. It includes the types of credit you’ve applied for, and your repayment history.
A good credit history can help you access finance, while a bad one may mean you are rejected, or offered finance at a higher interest rate.
Financial hardship and credit reports
When you experience financial hardship, you can sometimes enter into financial hardship arrangements with your lender to defer or reduce your obligations for a temporary period.
In the past, your credit report may have shown that you had missed repayments - despite entering into the financial hardship agreement, orit may have shown nothing, suggesting there was no financial difficulty.
New changes to financial hardship reporting
From the 1 July 2022, this is all set to change. Credit providers will be required to disclose financial hardship information to credit reporting bureaus.
This means the repayment history in a credit report will, reflect that a financial hardship arrangement is in place.
So, if your lender agrees to you repaying a smaller amount of your loan for a certain period, the credit report will include all repayments made during a hardship arrangement, rather than counting it as missed.
On top of that, financial hardship information is not used when calculating your credit score. So, if you experience financial hardship, you don’t need to worry about your credit score being negatively impacted due to your current circumstances - so long as you comply with your financial hardship arrangements.
Will new lenders be able to see my financial hardship information?
Yes, and no.
Credit bureaus will flag repayment information that’s associated with a financial hardship arrangement. This flag will be seen by a new lender if you apply for new credit, or an application for an increase to an existing line of credit.
However, if a lender is trying to collect overdue payments on existing loans, they will not be able to see your financial hardship information. On top of that, lenders can’t reduce a customer’s credit limit or refuse to provide further credit due to the financial hardship information.
How long does the financial hardship information appear on my credit report?
Financial hardship information only stays on your credit report for 12 months. This means a temporary setback in your financial circumstances won’t impact you long-term.
If you currently finding it difficult to make repayments on your personal loan, you can speak to someone in our team to help - firstname.lastname@example.org
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