Do deferrals count against my credit history? Your bank may have a range of options to help you.
If you are experiencing financial difficulty and believe you will not be able to make your loan or credit card repayments on time, it is important to get in touch with your bank.
Your bank may have a range of options to help you. The best course of action will depend on your individual situation and your needs. Depending on your circumstances, you and your bank may agree to a financial hardship arrangement. For example, this may be that:
- you stop making repayments for a few months to get a bit of breathing space
- you continue to make smaller repayments to reduce the total balance you owe
If you and your bank agree to a financial hardship arrangement, they will tell you so. Keep in mind there are other types of payment arrangements that are not for financial hardship.
What does financial hardship mean for my credit report?
Prior to 1 July 2022, financial hardship arrangements were not included in the information allowed on consumer’s credit reports. As such, a consumer’s credit report might have shown that they have missed repayments during a hardship arrangement, even if those missed or reduced payments were agreed as part of a financial hardship arrangement with their lender. Alternatively, some lenders ceased reporting a customer’s repayment history during a financial hardship arrangement. The lack of consistency across lenders led to confusion for consumers and banks alike.
From 1 July, the credit reporting system will be much clearer, with the introduction of “financial hardship information”. If you agree to a financial hardship arrangement with your bank, your credit report will show that you have made your repayments on time for the period of the arrangement. This is provided you meet the terms of the financial hardship arrangement agreed with your bank.
Your credit report will also include information that indicates you are in a financial hardship arrangement. This information will stay on your credit report for one year and then disappear. Your credit report will not include the reason for your financial hardship arrangement.
Who can see that I have been in financial hardship?
Any bank, credit union or licensed finance company will be able to see whether you have been in a financial hardship arrangement within the last 12 months provided they have a valid reason to check your credit report.
When you apply for a new loan or credit card, this may prompt your bank to ask a few questions to understand whether you are still experiencing hardship and if you can afford the loan or credit.
What if I refuse a financial hardship arrangement?
If you do not enter a financial hardship arrangement with your bank and are unable to meet your monthly repayments, then your credit score may suffer. Credit reporting bodies do not use financial hardship information to calculate your credit score. However, they do include missed repayments. Your repayment history remains available for two years, while hardship information is removed after one year. This means that, one year on, it will no longer be possible to tell from your credit report that you were in a financial hardship arrangement.
Credit reporting fact sheets and FAQs
The ABA has produced the following short guides for consumers and financial counsellors. You can also access frequently asked questions here.
Short Guide: Customers
If you agree to a financial hardship arrangement with your bank, your credit report will show that you have made your repayments on time for the period of the arrangement.Download Customers
Short Guide: Counsellors
It is important to note that not all arrangements are treated as financial hardship arrangements.Download Counsellors