Your questions answered - the impact of COVID-19 on your credit file
At Equifax we have had a number of queries from customers asking how the current situation will impact their credit report and score, especially if they are struggling to pay bills on time. Or, what happens if they apply for a mortgage deferral. We answer some of those questions for you below.
1. What will happen if I am unable to pay my bills on time?
The key thing to do is to contact your credit provider and talk through it with them. The earlier you do this, the better. You might be surprised how willing they are to make things work for you and your credit facility.
2. Can a creditor list a default on my credit file if I am unable to make a payment?
A creditor can raise a default when certain criteria are met, such as a payment being at least 30 days overdue. Often creditors will not do this if you are engaging with them to make alternate arrangements and this is likely to be particularly true in the unique circumstances caused by COVID-19. Talk to your credit provider and see what options they can offer.
3. Will applying for a mortgage deferral or other similar arrangement impact my credit score?
There is broad agreement across the industry and consensus on how your credit provider can record your repayment deferral (sometimes also referred to as a payment holiday) without adversely impacting your credit record. Equifax is continuing to work with all credit providers to ensure we can correctly manage different situations as the COVID-19 crisis continues to evolve.
Please do speak with your credit providers to understand how they are managing any payment variation agreements currently.
Further information can be found on NZBA.org.
4. What is considered as Hardship?
Hardship is often used in a general manner to describe when an individual is experiencing some sort of financial difficulty, often due to unexpected circumstances.
There is also a formal specific use of Hardship in terms of a consumer’s right to make a Hardship Application to their credit provider. This is a process through which an individual can request a change to their contract terms, such as altering the repayment period so that they are better able to meet the agreed repayments. To understand this process please read - what to do if you are struggling with debt.
5. What can I do to ensure my credit file does is not impacted at this time?
Anybody can experience a period of financial difficulty, and it is not necessarily an indicator of their ongoing willingness and ability to responsibly manage their financial commitments.
The key thing to do is to contact your credit provider and talk through it with them. If you can make alternative arrangements and keep to them, then that is what will be reported to Equifax and it will help avoid any negative impact on your credit report.
If you have any concerns about your credit history, then you can order a copy of your Equifax credit report through our dedicated website My Credit File.
6. What is Equifax doing to ensure credit files won’t be impacted by COVID-19?
Equifax is continuing to work with all credit providers and other industry groups to ensure we can correctly manage different situations as the COVID-19 crisis continues to evolve.
If individuals are making and keeping to suitable arrangements with their credit providers, then they should not expect to see significant changes to their credit profile as a direct impact of COVID-19. As several factors contribute to your credit score, however, there will likely still be some natural variation over time.
7. Will I still be able to get credit while I have an active mortgage deferral or payment arrangement?
Any credit provider has obligations to ensure that it is lending in a responsible manner. This includes ensuring that the credit product offered will meet your needs as well as not increasing the chance or impact of financial hardship. If applying for additional credit at this time, make sure your credit provider fully understands your situation and can offer an appropriate solution. If in any doubt, always seek independent financial advice.
8. Where can I find out more about managing my financial situation at this time?
Please see the official Government web site for COVID-19
The Commerce Commission has also released thorough FAQs for both borrowers and lenders
9. Where can I get help and advice?
The two links below are for government funded services which may be able to offer guidance: