Are the hard times hurting your credit score? How to check
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We are struggling pretty hard to make ends meet at the moment. Missing some bills, already unable to make our car repayments. So we have applied for, and been granted, a repayment holiday for six months. I’m sure you can imagine how much stress this is all putting on us but my question to you is what damage it is doing to our futures? What will our credit scores look like after all this is over and the mortgage is not so expensive anymore? Thank you, Sylvia
Oh Sylvia, it’s so tough right now. Inflation is flowing through to every aspect of everyone’s budget and the pain is, in some cases, acute.
“Financial hardship” arrangements can no longer affect your credit score.Credit: Matt Davidson
To your question: recent changes mean you are able to access your credit report and score direct from any of the three credit bureaux in Australia: (Equifax, https://registration.my.equifax.com.au/eligibility-reason
Experian https://www.experian.com.au/consumer/order-credit-report
Illion https://www.illion.com.au/#illion-for-individuals), once every three months. (Or in between if you’ve been declined credit in the last 90 days or had an item corrected on your credit report.)
And know you are not alone in being worried about it. The Equifax website notes there is heavy demand from Australians checking their credit scores and Experian tells me they’re at a record number, up 42 per cent from 2022.
You see, you are instantly able to see what damage has been done.
On what you’ve told me, though, there is good news and also potentially some bad.
The good news – and a development post-COVID-19, when financial institutions basically made up how they recorded them – is that “financial hardship” arrangements can no longer affect your credit score.
Crucial to your whole situation is that a record is kept for two years of whether you have made your repayments on time. Only payments that are for credit are treated this way. I will get back to utilities and other bills shortly.
As of July 1 last year, provided you agree to and adhere to the terms of a hardship deal, your provider must now say every month that you have paid on time.
The only thing that will appear in your credit report is that you have a financial hardship deal. No detail, no further disclosure.
Better still, this designation will disappear from your file just one year after your arrangement has ended.
On your other debt repayments, though, it’s vital to realise you have only 14 days’ grace before it will instead be recorded on your file that your repayment was late.
Any such transgression will factor into your credit score calculation – repayment history is said to account for about 35 per cent, depending on the credit bureau – and push it down.
And don’t forget the record hangs around for two years, so you can expect your score to be suppressed for that long.
So what about other bills?
With these, you have a much longer 90 days before it goes on your report and is factored into your score.
But the damage will be done for five years, which is an awfully long time.
Here’s some food for thought, though, Sylvia: you are not meeting repayments on your car… is it an expensive one? Is it a second car? Is it time to embrace austerity and sell it?
You also mentioned the strain of your mortgage repayments. Know that the most competitive quality lender on the market is charging just 5.69 per cent (Tic Toc, backed by an authorised deposit-taking institution, which is important: Bendigo and Adelaide Bank).
No, you would probably not qualify for that new lender with a hardship designation on your file. But your existing lender can’t look at that file unless you apply for a product change.
So go to your existing lender: don’t mention you are struggling too hard but do tell them you know they are charging over the odds based on the “best in market”… and see if they extend you a discount.
Finally, I recommend you give the National Debt Helpline https://ndh.org.au/ a call on 1800 007 007. They will put you in touch with a free financial counsellor in your local area, who will take a forensic look at your finances, identify where you could make savings and even advocate for you for better deals with your other creditors.
You’ve got this.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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