The coronavirus pandemic has created financial uncertainty for many Australians. The Federal Government has introduced a few financial assistance options including loan and credit card deferrals for individuals affected by COVID-19, giving successful applicants the option of pausing payments, provided their pre-COVID-19 payments were up to date. The deferral period of these payments will have no effect on credit ratings, according to the Australian Banking Association.
It is important for people to understand what a loan or credit card deferral can mean. For example, a loan pause can result in your loan term being extended overall if you want to preserve the same repayment rate after the pause ends; or it can cause a higher repayment rate, if you the loan term is not extended. It is important to consider all the information upfront and making the best decision for your personal circumstances.
The industry-wide agreement is good news for diligent customers who have suddenly found it impossible to keep up with the bills after losing their job or having their income severely reduced.
ABA Chief Executive, Anna Bligh, said: “Australia’s banks are here to support customers who have lost their jobs or significantly lost income because of COVID-19… Customers in these circumstances should not have to worry about their credit rating as well.
For customers who were already behind in their loan repayments, the ABA has said banks will determine how to report the information once the repayment pause has ended and opt to report nothing during the pause.
Tips for Aussies struggling to meet repayments
If you cannot make a repayment because of COVID-19:
- Talk to your bank before you miss a repayment, rather than after when damage might already be done to your credit report.
- Contact your bank via their website or phone app. If you cannot reach them, try contacting them by email or on social media. Lenders are likely to backdate any repayment pauses if you have tried to make contact.
- Before you pause your mortgage, ask your bank for a rate reduction to help you keep up with the repayments. Repayment pauses can provide some much-needed relief, but they are likely to be costly in the long run.
- If you are getting charged interest on your credit card, consider switching to a low rate card.
- Try and avoid adding to the problem (where possible). If you have a credit card, you can ask your lender to lower the limit to something you know you can manage.
- When you do get some money coming back in, try and clear your debt as quickly as possible.
Can I improve my credit rating or change my credit report?
There are steps you can take to improve your credit score over time to assist in future financial planning. Some initial steps you can take are to reduce your credit limit, put a pause on applying for credit through loans and credit cards, and set up reminders or direct debits to ensure that you pay bills, from utility to credit cards, on time. While some information can affect your rating for several years, after taking positive steps, your score should gradually improve.
You can only change incorrect information on your credit report. This may include your name, date of birth or address, if a debt is listed twice or the amount of debt is wrong, or if a debt that is not yours is incorrectly noted on the report.
You can find out more about fixing these errors by contacting Solve My Debt Now on 1300 070 672 and talking to our specialist team.
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