Many people will, at some point in their life, feel like they are struggling financially. This can happen for different reasons – losing your job or having your income reduced, personal illness or illness of a family member, and relationship breakdown are just some of the reasons. Sometimes, people simply take on more debt than they can manage. Or, very likely, it’s a combination of reasons.
If you are unable to make your payments, this could show up on your credit report as a number of payments being missed under “repayment history information” (if it’s a loan from a bank or other type of finance company) or, if you become seriously overdue, as “default information” or a court judgement. Both of these types of information are likely to reduce your credit score and make it more difficult for you to get credit.
For a detailed explanation of the types of information in your credit report, click here.
However, there are things that you can do to protect your credit report.
Help when you’re struggling - hardship assistance
‘It’s important that you speak to the credit provider you owe money to. Lenders (like banks, credit unions and finance companies) and many other types of credit providers (such as phone, electricity and gas suppliers) are required to assess you for a ‘hardship variation’ if you ask for help.’
Depending on your circumstances, the credit provider may agree to change your payment terms to give you more time to pay, or to reduce what you are required to pay. This may help to get you back on track.
If they do agree to change your payment terms, then your credit report will reflect those new terms. For example, if they agree to halve your payments for a few months, your credit report will show that you’ve met your obligations provided you pay those reduced payments. Likewise, if your payments are changed, then a default won’t be listed on your credit report provided you pay the changed payments.
If the credit provider refuses your hardship application, they must give reasons. If you are not happy with their response you can lodge a dispute (for free) with the credit provider’s external dispute resolution (EDR) scheme; these are independent bodies who look into consumer complaints.
You can get more information about your right to ask for hardship assistance at MoneySmart – an initiative by the Australian Securities and Investments Commission, an independent government body.
Free financial counselling services are available to help you get back on top of your financial situation if you are experiencing financial difficulties. Financial counsellors work in community organisations and provide advice about credit and debt issues. Financial counselling is free, independent and confidential.