Financial Hardship Q&A's

Financial hardship occurs when you are having trouble meeting your payment obligations for your loans and other debt.  This could be because of an unexpected event or unexpected change in your circumstances (such as illness or injury, becoming unemployed, being affected by a natural disaster or cost of living pressures). 

If you are finding it difficult to make repayments on your credit accounts or have experienced an unexpected change to your circumstances that might impact your ability to make your repayments, you should contact your lender about financial hardship assistance as soon as possible. 

Lenders have well-established programs to assist you if you are experiencing difficult financial circumstances, and they will guide you through the process. Remember that financial hardship can affect anyone, and lenders have experience helping their customers to get back on track. Your lender will discuss arrangement options with you, considering:  

• the type of loan or credit you have 
• the reasons why you are struggling to make repayments 
• whether those reasons are likely to be short or long-term. 

It is important to work with your lender to find a solution. Keep in mind that your lender is not required to agree to a financial hardship arrangement. It will depend on their assessment of your financial circumstances and why your repayments are overdue.  

If you don’t request a financial hardship arrangement or are unable to agree to a financial hardship arrangement with your lender, and you do not make your required repayments on time, your credit report will show missed repayments.  

Your repayment history will continue to show that you’re behind, until you get back up to date.  The repayment history information in your credit report is a 24-month view of how you manage and pay your loan and credit accounts, so months of overdue payments can be a negative reflection on how you manage credit and impact your credit score and applying for credit in the future.

Repayment history is shown as a number that reflects whether you are up to date with your payments and, if not, for how long you haven’t been. A code of ‘0’ shows that you are up to date (this is sometimes shown as a tick). A higher number shows that you are overdue for the month, where the number approximately refers to the number of months you are overdue (between 1 – 6). If you are more than 6 months overdue, this will be shown as ‘X’. 

There are limits on what a lender can do with the financial hardship information, and those limits are intended to protect consumers. For example, a lender is not allowed to use financial hardship information as the sole basis for closing a credit card account or reducing its limit. 

Credit reporting bodies are also not allowed to use hardship arrangement information when they calculate your credit score.

Financial hardship information – for both a temporary or a variation arrangement – only stays on your credit report for 12 months. After that time, it is no longer possible to tell from the credit report that a financial hardship arrangement was in place.

Seeking financial hardship assistance does not exclude you from applying for credit in the future.

If your credit report has financial hardship information, a potential lender may ask you for more information about your current situation to understand whether you are still experiencing hardship and if you can afford the new loan or credit account. A lender may ask for some additional information about your finances to check that you can repay a new loan.

No matter what has happened over the last 12 or 24 months, making your agreed repayments on time now will help you look better to other lenders.

If your lender has agreed to lower repayments under a financial hardship arrangement, but you’re struggling to meet even those payments, it is important to talk to your lender again as soon as possible.

They can re-assess your situation and might be able to suggest a more workable arrangement.

If you don’t make the reduced payments required under the financial hardship arrangement, the missed payments will be shown as part of your repayment history.

In some circumstances, your lender might end your financial hardship arrangement early. If this happens, all the missed or deferred payments could become payable immediately. In this case, your repayment history may show that your account is very overdue.

It’s important to chat to your lender if you are continuing to struggle with repayments.

Your credit provider will try to offer hardship assistance that suits your individual needs. However, the way that the assistance is structured can also depend on:

• The type of credit provider
• The type of loan, and
• The type of assistance requested.

While the exact form of financial hardship assistance can vary, the new reporting system introduced in July 2022 provides greater consistency over how these arrangements are reflected on your credit report.

Importantly, no matter what type of hardship arrangement you agree to with your bank or other licensed credit provider, your repayment history will show that you are up to date if you meet the requirements of that new arrangement (even if your lender has agreed that, in the short-term, no payments are required).

Lenders may take different approaches however the law includes some important protections for how financial hardship assistance received from your lender can impact the credit you have with other lenders. 

For example, a credit provider can’t cancel your credit card limit merely because there is financial hardship information in your credit report, and financial hardship information will not be given to a credit provider if they ask for a copy of your credit report to collect overdue payments. 

A temporary financial hardship arrangement temporarily reduces your normal loan repayments by deferring payments that become due during the arrangement (deferred payments means payments stretched out to a later due date).  

So, it is likely that at the end of the arrangement your normal loan repayments will still be behind (including any payments that you missed before agreeing to the temporary financial hardship arrangements).  Make sure to talk with your lender before the end of a temporary financial hardship arrangement so you can discuss what your options are to deal with those unpaid amounts before the arrangement comes to an end.

The options could include paying off the deferred payments over an extended period of time. This will help to avoid having repayment history information reported at the end of the arrangement showing that the account is very overdue. 

No. Information about financial hardship arrangements is only recorded on your credit report if your repayment history is also being recorded for that debt.

Businesses that provide credit for services, such as phone, internet, gas and electricity, are not able to report your repayment history, so if you enter a financial hardship arrangement with these businesses it is not shown on your credit report.

However, it is still important to talk to your phone, internet, gas and electricity company if you are struggling to make payments. If you do not make payments for those accounts, it could eventually result in a default being recorded on your credit report. Agreeing to a hardship arrangement – while it will not be recorded on your credit report – will help prevent a default from being recorded.

A financial hardship arrangement agreed by one account holder will be shown on the credit report for all joint account holders. 

An arrangement can be agreed between the lender and one account holder of a joint account, although a credit provider may look to talk to the other accounts holders or at least let them know that the agreement has been put in place. 

There are some exceptions, particularly if the account holder who is asking for the financial hardship assistance is subject to domestic abuse and tells the lender that they are worried that another account holder may threaten or cause them harm because of the financial hardship information being recorded. In this case, the credit provider can choose to not show any repayment history or financial hardship information during the arrangement on the account for all joint account holders. 

Talk to your lender as quickly as possible and explain your circumstances to them. In the case of domestic or economic abuse, there may be additional steps your lender can take to help you.

A financial hardship arrangement agreed by one account holder will be shown on the credit report for all joint account holders. 

An arrangement can be agreed between the lender and one account holder of a joint account, although a credit provider may look to talk to the other accounts holders or at least let them know that the agreement has been put in place. 

There are some exceptions, particularly if the account holder who is asking for the financial hardship assistance is subject to domestic abuse and tells the lender that they are worried that another account holder may threaten or cause them harm because of the financial hardship information being recorded. In this case, the credit provider can choose to not show any repayment history or financial hardship information during the arrangement on the account for all joint account holders. 

The type of hardship assistance agreed with your lender should reflect your individual circumstances.

Some hardship arrangements involve a deferral of payments during the arrangement, with the deferred payments still being owed at the end of the arrangement period (deferred payments means payments stretched out to a later due date). You should talk to your lender about how to resolve those deferred payments in a way that is manageable for you. This could involve letting you catch-up over time or some other method.

Under the law the lender is expected to work with you to come to an arrangement that suits your financial circumstances. It’s important that you talk to the lender at this point and not avoid their attempts to contact you.

Yes. If you are struggling to make your payments, it is important to recognise that a history of repeated missed payments will show on your credit report and can make it harder for you to get credit in the future. If missed payments continue, it could even result in a default being recorded on your credit report. 

Yes. If you miss payments, it will show on your credit report. This means your credit score will go down, which can make it harder to get credit in the future. A financial hardship arrangement will change how often or how much you need to pay. If you pay on time with the new arrangement, then your credit report will show your payments as paid.

No, the financial hardship assistance or the note about it on your credit report won’t affect your credit score. Legally financial hardship information cannot be used by a credit reporting body to calculate a credit score.

Getting help early can ease the pressure for you and can help avoid late fees or other charges for missed payments. Lenders will do what they can to help you through hard times, and work with you until your finances are back on track. Asking for support may also protect your credit report if you agree to a financial hardship arrangement because it will help to avoid missed payments being reported. 

The sooner you ask for help, the sooner you can find a solution. 

A temporary financial hardship arrangement defers your obligation to make payments (deferred payments means payments stretched out to a later due date). It does not remove those obligations, and you will need to either make those payments at the end of the arrangement or come to another arrangement before the first one ends. 

Talk to your lender as soon as possible if your temporary financial hardship arrangement is coming to an end, so you can agree on the next steps. Under the law the lender is expected to work with you to come to an arrangement that suits your financial circumstances. It’s important that you talk to the lender at this point and not avoid their attempts to contact you.

If you do not contact your lender, all those deferred payments could be shown on your credit report, so your account will look very overdue. Having a very overdue account will make your credit score go down and could make it harder for you to get credit in the future.

Your credit report may have information about your repayment history for your credit cards and other loans (e.g., personal loans and home loans) – that is, whether you have made your required payments on time. This is very important information, because if you apply for a loan with a new lender, it tells them how well you’ve managed your existing loans.

Your payment history is reported on a month-by-month basis. Other lenders will see a 24-month history of your payments (after 24 months, the information is removed from your credit report).

During a financial hardship arrangement, your repayment history will show whether you have met the requirements of the financial hardship arrangement (instead of your usual payment obligations). 

For example, if your lender agrees to accept $500 payments per month during a financial hardship arrangement instead of the usual $1000, your repayment history will say that you met your payment obligations for a month if you pay that $500 on time. If your lender has agreed that no payments need to be made during the arrangement, your repayment history will also show that you have met your payment obligations. 

Your credit report will also show that those payment obligations have been impacted by a financial hardship arrangement. This will be shown by a letter code of ‘A’ or ‘V’ (depending on the type of arrangement) that will go next to your repayment history. However, your credit report will not include the reason for the financial hardship arrangement, or the details of the arrangement.

The reporting financial hardship arrangements do not currently apply to most buy-now-pay-later products. If you are talking to your lender about a financial hardship arrangement for a buy-now-pay-later product, ask the lender how this will be shown on your credit report.

The financial hardship arrangement will be shown as a simple letter code (‘A’ or ‘V’) next to your repayment history. 

There are two types of financial hardship arrangements that are indicated by two different letter codes:

• ‘A’, which refers to a temporary financial hardship arrangement. This is a type of short-term relief or deferral of payments.
• ‘V’, which refers to a variation financial hardship arrangement. This is a change to the terms of a loan agreement, such as a change to the repayment obligations or an extension of the term of the loan.

Repayment history is shown as a number that reflects whether you are up to date with your payments. During a financial hardship arrangement, repayment history simply shows whether you: 

• Paid on time with the new arrangement, shown as a code of ‘0’ or a tick; or
• Did not pay on time with the new arrangement, shown as a ‘1’.

So, if you and your lender agree to a temporary financial hardship arrangement where you are required to make reduced payments of $500 per month (instead of the ordinary $1000 per month), your credit report will show ‘0’ (or a tick) as your repayment history - provided you make the $500 on time - and your repayment history will include an ‘A’ alongside the ‘0’ (or tick).  Other credit providers, if permitted to look at your credit report, will see that you’ve met your payment obligation for that month and that the payment obligation was made under a financial hardship arrangement. 

If you don’t make the $500 payment on time, your repayment history will show the payment as missed (i.e. ‘1’ and include an ‘A’).

Importantly, your credit report will not include the reason for the arrangement and, provided you make the reduced payments under the hardship arrangement on time, your credit score will not be impacted. 

Credit providers will look to offer financial hardship assistance that meets your needs. However, the precise way that the assistance is structured can depend on:

• the type of credit provider
• the type of loan or credit account
• the type of assistance requested. 

Assistance may include:

• reducing your repayments for a period of time
• deferring your repayments for a period of time
• extending the remaining term of the loan to permanently reduce the monthly payments.

While the precise type of financial hardship assistance can vary, the financial hardship reporting regime means better consistency for how these arrangements are then reflected on credit reports. Importantly, if you are in a financial hardship arrangement – of whatever type – your repayment history will show as up to date on your credit report if you meet the requirements of that arrangement (even if no payments are required under your arrangement).