Temporary financial hardship arrangement
This explanation applies to you if:
- you are experiencing financial hardship and having trouble making credit account payments and
- you and your lender have agreed to temporarily defer your payment obligations (so that you can make the payments later)
- A temporary financial hardship arrangement appears on your credit report as 'financial hardship information', together with your repayment history.
- Your repayment history will show that you have met your obligations if you make the reduced payments on time. This protects your credit report while you are in financial hardship.
- Financial hardship information does not exclude you from applying for credit in the future. It cannot be used in calculating your credit score, and will come off your credit report after 12 months.
- Talk to your lender if you still struggle to make the reduced payments, and when the arrangement is due to end as the payments that were deferred will need to be paid, or be subject to another arrangement.
Your credit report includes a month-by-month history of whether you make your repayments on time. A financial hardship arrangement helps to protect that history.
Your repayment history is normally based on payments required under your loan agreement. If you've agreed to a financial hardship arrangement, your repayment obligations under the arrangement temporarily replace those of your agreement.
What is reported is whether you make the repayments agreed in the financial hardship arrangement.
For example, if your normal repayments are $1,000, but under a financial hardship arrangement you are expected to temporarily pay $500, this will appear as up to date as long as you pay $500 on time (i.e., or ).
If you don't make the repayment on time, your credit report will show that the repayment was missed (i.e. ).
If you are temporarily not required to make any repayments during the arrangement, your credit report will appear as up to date (i.e., or ).
Two different types of financial hardship information can be included in your credit report, depending on the type of arrangement:
- reflects a temporary arrangement
- reflects a permanent change and the loan is varied. This may be required at the end of your financial hardship arrangement.
In both cases, the repayment history is based on the new agreed repayments required under the arrangement.
If you agree to a temporary arrangement or deferral with your lender, your history will include an , and
- or if you make the agreed repayment on time (or there's no repayment required),
- or if you don't make the repayment on time.
If the loan agreement is varied at the end of the arrangement, this will show as a (and your repayment history will reflect whether you make your normal payments on time).
For example, this might be necessary if there are still deferred payments that haven't been paid, or the length of the loan needs to be extended (to give you time to make the deferred payments).
Things can go wrong when:
- you have agreed to reduced payments under a financial hardship arrangement, but you don't make those reduced payments on time,
- a part of your arrangement is coming to an end and you haven't made arrangements to deal with the temporarily deferred payments, either by paying them or agreeing to another arrangement.
In both cases, unless you communicate with your lender, the arrangement to help you through your financial hardship may be ended prematurely.
If this happens, the balance of all missed, reduced or deferred payments - before and during the arrangement - can become immediately payable and be reflected on your credit history, so your account will appear very overdue.
Communicate with your lender as soon as possible if:
- you struggle to make payments, even under a financial hardship arrangement; or
- your arrangement is coming to an end, so you can agree on the next steps.
Financial hardship information only stays on your credit report for 12 months.
From that point, it's not possible to tell 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 need more information about your current financial standing and if you can afford the new loan.
No matter what has happened over the last 12 or 24 months, making your payments on time now will help you look better to other lenders.
A credit report is a record of your credit history. It includes:
- personal information to identify you,
- information about loans and other credit you have opened or applied for,
- a month-by-month repayment history,
- financial hardship information if you've agreed to a financial hardship arrangement.
A repayment history is a 24 month view of how you manage and pay your loan and credit accounts:
or means you are up-to-date with repayments (and mean the same thing)
to indicates how many months your repayments have been overdue (unless a temporary financial hardship arrangement applies)
means repayments are 7 or more months overdue
A good repayment history can help when you apply for credit in the future.
If you've missed a repayment, restarting your payments and getting back up to date as soon as you can will help improve your credit report. Repayment history stays on your credit report for 24 months.
If you are experiencing financial challenges, the National Debt Helpline offers a free, independent, and confidential service.
ASIC's MoneySmart website also contains a list of free counselling services.