Common COVID-19 Questions: Credit card repayments & your credit score
As the COVID-19 pandemic continues to evolve, many Australians are facing financial difficulties due to the sudden change in their financial situation. If you have a credit card, the Credit Savvy Team is here to help answer some of the common questions you may have regarding how late credit card payments or requesting a credit card payment deferral can impact your credit score.
Late credit card repayments can affect your credit score
With millions of jobs on the line, many Australians could be at an increased risk of missing their repayments. Research by Experian* has found that credit scores can drop by 22% following just one missed credit card repayment. This drop increases to 26% with two missed credit card repayments and 42% for those with three or more missed credit card repayments within three months.
Remember, late payments and defaults on your credit report can impact your future credit applications. So, if your financial situation has been impacted by the pandemic and you’re struggling to pay off your credit card bills, it’s crucial to get in touch with your credit card provider as a priority to discuss your options.
Can deferring your credit card repayments impact your credit score?
When you organise a payment deferral arrangement with your credit card provider, missed credit card payments during the hardship assistance period -won’t show up on your credit report. However, as different providers have different hardship policies and credit reporting practices, make sure you contact your credit card provider directly to discuss your options, the terms of any repayment deferral periods, and what this means for you and your credit score down the track.
How to protect your credit score during COVID-19
Here are some tips on how you can proactively manage your credit score:
- Contact your credit card provider. Get in touch with your credit card provider to discuss what hardship arrangements are available for your circumstances and how they can help you manage your credit card repayments during this crisis. If you’ve been granted hardship by your credit card provider, don’t forget to ask what information will be reported on your credit report during the support period.
- Make your minimum repayments on time. It’s important to ensure you pay the minimum monthly amount agreed upon with your credit card provider to avoid negative events being recorded on your credit file.
- Consider the risks before applying for more credit. If you’re struggling to pay your bills, increasing your credit card limit or applying for a payday loan can hurt your credit score and your future credit applications. You should speak to your lender directly as they may be able to help you work out a suitable repayment plan instead.
- Monitor your credit reports closely. Regularly checking your credit report can help you guard against anything that shouldn’t be on your file. Make sure you check that the information is accurate and up-to-date and that any missed repayments have not been improperly reported.
Want to find out where you stand now? You can check your credit score and credit file information for free anytime, anywhere with Credit Savvy.
Will I be charged late payment fees if I’m in hardship?
Many credit card providers are waiving late payment fees for a certain period during this crisis. Check with your credit card provider directly to learn more about their credit card interest, fees and charges.
Are there other ways to manage my credit card repayments?
Staying on top of your finances is now more important than ever. Regardless of whether you’re affected by the pandemic or not, it’s important to learn ways to manage your credit card under the current climate. If you require further financial support, you can also check out a range of resources in our Key Resources article.
The COVID-19 & your finances series contains tips and support information to help you manage your finances during this difficult time.
*The Experian credit bureau research was based on a consumer research survey conducted in May 2019 using an online survey method. The survey was completed by 1,000 Australians representative of the nation as a whole aged 18 and over. Visit Experian for more information.