FAQ’s on COVID-19 impact on credit reporting
Is assistance only available for consumers with a home loan?
No, if you are experiencing hardship you have a right to ask for assistance for any loan or credit account you have from your lender.
Do I have to make up the payment I miss later?
If you opt for a payment pause or make lower payments than usual, you will have to make up repayments later on – your lender will explain when and how that will happen.
I have deferred my home loan with the bank for 6 months. I had missed one payment when I called to make the deferral. What will happen on my credit report? What will the affect be on my credit score?
If you find that your financial position has been affected, the first thing to do is contact your lender as soon as possible and let them know that you need help meeting your loan or credit repayments.
Your credit report is a balanced reflection of your credit history. It includes information on the type of accounts you hold, up to 24 months of your account repayment history, how many times you have applied for credit and how much debt you have available.
Given that you have now missed a payment, ask your bank what their next steps are. If the missed payment was due to COVID-19, the bank may backdate the assistance to cover the payment that you already missed.
During the period that your home loan is then deferred, your credit report is likely to either reflect that your payments remain up-to-date, or no payment information will be provided. Your credit report will not show that you have failed to meet payments during the deferral period.
You are unlikely to see much change in your credit score simply because you are receiving a payment pause or other assistance from your lender due to COVID-19. Lenders will also pay less attention to these credit scores when you apply for credit during the COVID-19 period and put more focus on understanding your whole situation, such as your income, expenses, and employment status.
Just remember, if you need a payment pause or to make lower payments than usual, you will have to make up repayments later – your lender will explain when and how that will happen. But lenders will not list a default if you are receiving COVID-19 assistance. Lenders should also not list a default if you have requested assistance, but the lender is considering, or processing your request.
I have a home loan with a non-bank lender. I have negotiated a 6-month deferral. They did not say anything about my credit report or credit score. What will happen to my credit report and credit score?
This will depend on the non-bank lender, so the best thing you can do is to contact them directly and ask them to explain what impacts there may be, relevant to your situation.
Lenders report your monthly loan repayments, up to 24 months, in your credit report as it provides a balanced reflection on the way you manage each of your accounts.
The 6-month deferral will not show as missed payments on your credit report. Instead the repayment history information will either be reported as ‘up to date’, or no repayment history will be reported.
If no repayment history is reported, for most customers this will not have a big impact on your credit score during the first few months, but you may see a drop after 3+ months. Additionally, lenders should not list defaults against any consumer that has been granted or has requested assistance due to hardship resulting from COVID-19.
Any change in your credit score is unlikely to impact your ability to get credit. If you apply for credit in the future, before approving your loan, lenders will take your whole situation into consideration – not just whether you needed help with repayments during COVID-19.
I have been dealing with a debt collector relating to my credit card debt. Are debt collectors listing missed repayments on my credit report?
While lenders will not list missed repayments if you are receiving COVID-19 assistance, the situation with debt collectors relating to credit card debt is different.
If the debt collector you are dealing with has ‘bought’ the debt (also known as a ‘debt buyer’), they are now the owner of your account. Usually debt buyers purchase the debt as a closed account from your original lender. Repayment history cannot be listed for a closed account.
But if the debt collector is collecting on behalf of the credit provider, i.e. they have been engaged to collect from you, then your credit provider may still be reporting your repayment history information.
Therefore, it is so important to contact your lender or credit provider as soon as possible if you find out that your financial position has been affected and you need help meeting your loan or credit repayments.
Are any credit reporting bodies offering free credit reports more than once every 12 months? Because of the pandemic, I need to check my credit report more than once a year.
In Australia, everyone has the right to one free credit report every 3 months from each of the 3 main credit reporting bodies. These reports include the information that credit providers see when you apply for a loan, so it is important to check each report.
If you’ve already accessed your free credit report, you can still get another free copy if you meet the following eligibility criteria – where you have been declined credit in the last 90 days or you had an item corrected on your credit report.
For more information on credit reporting bodies, please read more here.
Are some credit providers still listing defaults on credit reports? What can I do to avoid a default being listed?
Lenders will not list defaults against any consumer that has been granted or has requested assistance due to hardship resulting from COVID-19.
However, some may still be reporting defaults, particularly if the default was not caused by the COVID-19 crisis (i.e. you were in default prior to the crisis). The best way to avoid having a default recorded is to talk to your lender about your situation, even if you were in default before the COVID-19 crisis, explain to the lender how the crisis has made it harder for you to remedy the default.
If you have any concerns about repaying your loans or credit accounts due to the impact of COVID-19 on your financial situation, speak to your lender. They want to see you get through this crisis with as little stress as possible.
Employment is listed on my credit report. I am currently on Jobseeker. Will my credit report reflect that change?
Details about your current or last known employer can be included on your credit report. This is part of identification information, and is used to identify you, matching your information to other information about you within the credit reporting system.
However, it is important to understand that this information would have been obtained from previous credit applications requested by you – you normally have to advise the lender of your employment situation when applying for credit, and the lender passes the answer to the credit reporting body. Your employer does not provide this information direct to a credit reporting body, and there are prohibitions on employers using the credit reporting system.
If you have lost your job and are now on Jobseeker, it means that until you apply for credit again, your credit report will continue to reflect your last known employer, even though you no longer work with them.
My bank has agreed to defer payments and stop interest on my credit card. How will that be recorded on my credit report?
In this situation your bank will either report that you are up-to-date with payments on your credit card - which will show an RHI (repayment history information) status of ‘0’ - or they will not provide any payment information to the credit reporting body - which will mean there is no RHI recorded for the deferral period.
The difference between these approaches is unlikely to mean much because if you apply for credit in the future, a credit provider will seek additional information from you, or review your account statements, to work out how you were affected by COVID-19.
Be aware that deferral options offered by banks on credit card accounts will vary depending on each credit provider. It is important to check how the deferral operates and check:
- Whether any restrictions have been placed on access to any unused credit? It is best to check this before a pause is put in place, particularly if you were planning to continue to use that credit, as you may be stopped from using it during that period
- Is interest continuing to be charged during the pause? This is important to know especially where unused credit can continue to be accessed. If no payments are being made, and interest continues to grow, the debt to be repaid at the end of the pause could be significantly more than it was before the pause.
Some credit providers will also be offering alternatives to a deferral which may be appropriate where you can continue to make payments, but the payment amount is less than your ordinary payment amount. For instance, they may offer to reduce the required minimum monthly payment or make other types of changes to the product.
Whatever you decide to do, the most important thing to remember is that while credit providers are obliged to assist you during hardship, you will eventually need to find a way to repay the credit, interest and charges to the credit provider. The deferral does not mean your obligation to make these payments goes away forever – however, you will be given some ‘breathing space’ to work things out.
How is the information about a “payment pause” used by lenders? Does it change whether a lender would think I am a “low risk” or “high risk”?
The COVID-19 crisis is a never-seen-before situation and lenders are forced to review and re-adjust all their processes and procedures. Lenders want to lend to people who can afford it – both during the crisis and, particularly, as the crisis eases.
Although they are still working through what to do, it is likely that lenders will take a broader range of considerations into account before deciding to lend. For example, they may look at your transaction account statement to look for signs as to whether you were impacted by COVID-19, by way of indications of Jobseeker payments, or they may take a different approach to assessing your application based on your job type/industry etc.
People within heavily affected industries may have to do a bit more to demonstrate that they can afford the loan and, it's an unfortunate reality, that they may find it a bit harder to get credit in the post-COVID-19 recovery period.
Remember, your credit report only becomes relevant when you apply for credit. If your financial situation has been significantly impacted by the COVID-19 crisis, before applying for credit, you will need to ask yourself whether you can afford more credit. Do not just let the bank decide this for you. You will need to take more control over your own financial health than ever before.
Why is it important to ask for assistance from my lender sooner rather than later?
If you need help it is always good to approach your lender as soon as possible. It is important to remember that if you opt for a payment pause or make lower payments than usual, you will have to make up repayments later on – your lender will explain when and how that will happen. If you wait until you are behind in repayments before asking for help, it may also mean interest and charges increase for those missing repayments. The sooner you ask for help, the better it will be for you.
Remember, if you are talking to your current lenders about your outstanding loans, no-one else will see your credit report unless you apply for new credit.
What happens if the lender has agreed that I can make lower payments, but I can't make them?
Customers who can make some of the regular repayment, but not all, may have agreed with their lender to make lower payments over the next few months. Sometimes this may involve going from a “principal and interest” loan to an “interest only” loan.
If you have agreed with your lender to make lower repayments, but now find you are still struggling to pay even those payments, it is important to talk to your lender again as soon as possible. Your lender will reassess your situation and help identify an appropriate level of payments going forward.
What happens when I am unable to make up the payments missed during the ‘payment pause’?
During a payment pause there will be no payments to make. However, at the end of the period, you will need to restart making payments plus somehow deal with the payments that you missed during the pause.
Your lender will contact you near the end of the payment pause period to check how you are going and to discuss what you can pay. If you are still struggling to make your normal payments, you can ask for more hardship assistance.
If you can make your normal payments, you and your lender will need to agree on what happens to the payments missed during the payment pause. The way that missed payments will be treated will depend on several things, including how the pause was given in the first place (did they change your payments to $0 or did they simply defer the payments?). Assuming you don’t have the funds to pay the missed payments straight away, the most likely way to deal with the missed payments is for your lender to add the payments back onto your loan (plus any extra interest that has been charged). If the payment pause was on a 'fixed-term' loan (i.e. a home loan or personal loan; but not a credit card), the lender will then need to either increase the repayments over the remaining term, or extend the term of the loan. If the lender suggests that the payments be increased to pay off the missed payments but you don’t think you'll be able to make those payments, you should talk to your lender and work out payment arrangements that you are able to meet.
While it may not be possible straight away, it would be a good idea to try to chip away at the missed payments once your financial situation is back on track. That also means if your financial situation is back on track before the end of the pause, you can end the pause early.
How do I go about disputing information on my credit report within the Repayment History Information (RHI) section?
If you notice an inconsistency or incorrect information in your credit report relating to any repayment history, you can contact the credit provider who provided the information. You could also contact the credit reporting body or any other credit provider who deals with you – however, it’s often easier to go the source of the information that you think is wrong (i.e. the credit provider who reported it).
It is important to remember that because some lenders may hold off on reporting repayment history information during the deferral, your report will not show the missed payment, but nor will it show that you “made” the payment (i.e. RHI will be a “blank”). The repayment history information will either be reported as ‘up to date’, or no repayment history information will be reported.
Additionally, lenders should not list defaults against any consumer that has been granted, or has requested assistance, due to hardship resulting from COVID-19.
If you apply for credit in the future, before approving your loan, lenders will take your whole situation into consideration – not just whether you needed help with repayments during COVID-19.