Several lenders have started offering mortgage deferrals of up to six months to their struggling borrowers — but will this affect their credit scores?
Mike Laing, CEO of the Australian Retail Credit Association, said mortgage holders should not worry about their credit scores should they decide to apply for a mortgage deferral.
"We've surveyed most of the significant lenders in the market as well as the small fintechs, and everyone who responded said they'll either keep reporting customers are up to date with their repayments or cease reporting for those accounts which have put repayments on pause," he told Business Insider Australia.
Australians who miss repayments typically get a mark on their credit reports that stays for up to two years. This could significantly affect their chances of getting a loan.
While the Australian Bank Association recently ordered banks to maintain reporting, Laing said financial providers are making arrangements to ensure that deferrals will not impact credit scores.
"While you still need to advise your bank if you're struggling financially, they understand that some people can't get through. As long as you've made an effort to tell them, your lender can go back, put your account on pause and retrospectively fix a missed repayment on the system," he said.
In a recent think piece in Mortgage Professional Australia, John Dickinson, managing director at DebtX Mediation Services, said struggling borrowers must reach out to their lenders to avoid defaults on their credit files.
"The key to protecting your credit file is communication with the lender. I understand this can be a very hard thing to do. It's common to be worried about making this all-important call as many people expect the lender will be aggressive and unhelpful, but they are usually the complete opposite, especially now," he said.
Collections: Mortgage News
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