What impact does a financial hardship arrangement have on a credit report?

From 1 July 2022, credit reporting changes will come into effect. They're designed to help protect your credit history if you’ve agreed to a financial hardship arrangement with your credit provider.

What’s changed?

Under the old system, your credit history would indicate all missed or late repayments, and any under-payments, as 'overdue' – even if you’d agreed to a temporary or variation financial hardship arrangement with your lender.

With the new system (as of 1 July 2022) however, your credit report will show an  or a  to indicate that you have agreed to a financial hardship arrangement with your lender. But, as long as you're meeting your new repayment obligations under the arrangement, your credit history will show that your payments are all on-time and up to date.

What’s more, if your lender agrees that you don’t have to make any payments under your hardship arrangement, your repayment history will still show repayments as on-time throughout the agreed period, even if no repayment has been made. 

What financial hardship information is in my credit report?

Your credit report contains information about your repayment history for credit accounts from things such as:

• Credit cards
• Mortgages and home loans
• Personal loans
• Car loans

If you’ve entered into a temporary financial hardship arrangement, then an  will appear on your credit history. If your lender has agreed to a variation financial hardship arrangement, then a  will show up.

That’s basically all the information about your arrangement that’s provided. Your credit report won’t include the reason for the hardship arrangement, or the details of it. 

Temporary or variation financial hardship arrangement?

There are two types of financial hardship arrangements: (Links to infographics)

• Assistance for a short period of time, e.g., reduced payments for a couple of months is known as a temporary financial hardship arrangement.
• Assistance over an entire loan period, e.g., an extension of the remaining term of the loan to permanently reduce the monthly payments, is called a variation financial hardship arrangement.

On your credit report, ‘financial hardship information’ is shown together with repayment history. 

The financial hardship arrangement will be shown as a simple letter code next to your repayment history:  for a temporary or  for a variation financial hardship arrangement.

What this means for your credit report

Your credit report shows whether you have made your monthly repayments on time for credit accounts like credit cards, home loans, personal loans, and car loans over the past 24 months. During a financial hardship arrangement, your repayment history will show whether or not you meet the requirements of the financial hardship arrangement (instead of your usual obligations). A financial hardship arrangement protects your credit report because, while the arrangement is active, your repayment obligations replace those of your loan agreement.

Important things to remember about financial hardship arrangements

• Your credit report is not harmed by having the financial hardship indicators on it
• What is reported is whether you make the repayments agreed in the financial hardship arrangement, so it is important to meet your obligations under the new arrangement
• Your credit report will not include the reason for the arrangement or any other details
• Your hardship arrangement information will not impact your credit score. The credit reporting bodies that calculate credit scores are not allowed to use financial hardship arrangement information to calculate your score
• The financial hardship arrangement indicators on your credit report only remain for twelve months from the end of the financial hardship arrangement agreement. This means that, one year after your financial hardship arrangement expires, it’s no longer possible to tell from your credit report that you experienced a period of hardship on your loan agreement.

Keeping in touch with your lender

Make sure you contact your lender if:

• You’re struggling to make payments, even under a financial hardship arrangement; or
• Your financial hardship arrangement is coming to an end, so you can agree on the next steps.

How you are protected

By law, the updated system includes protections for how hardship assistance received from your lender can impact the credit you have with other lenders. The rules mean that:

• A lender can’t close or reduce your credit card limit, just because you have received financial hardship assistance
• Your credit report will not be provided to a lender who wants to access to your credit report information for the purpose of collecting overdue payments
• Only licensed lenders (e.g., banks and finance organisations) will be able to view the financial hardship information on your credit report. This means that unlicensed entities such as energy companies, telcos and landlords cannot supply or access this information.

Who can provide or access information on a credit report?

There are rules and regulations in place to restrict:

• Who can supply repayment history to credit reporting bodies
• Who can access your repayment history and credit information
• The types of credit accounts that can be reported
• The types of financial hardship arrangements that may be in place.

Only repayment history, and information about financial hardship arrangements, from specific types of credit accounts such as credit cards, home loans, personal loan, and car loans can appear on your credit report. 

What about buy-now-pay-later accounts?

The changes to financial hardship reporting will not apply to most buy-now-pay-later products. So, if you are talking to a lender about a financial hardship arrangement for a buy-now-pay-later account, ask them if this will be shown on your credit report.

Only repayments history information for credit cards, home loans, personal loan, and car loans may appear on credit reports.