Even though we may have the best of intentions when it comes to our financial well-being, repaying our debts and keeping our credit reputation in tip-top shape, sometimes life gets in the way.

Falling into financial hardship is tough, can have a damaging effect on your credit reputation and can impact your ability to access credit in the future. Do you have a friend that always borrows money from you but never pays you back? Gets pretty annoying, doesn’t it? Credit providers feel the same way. Potential credit providers don’t like to see late payments, defaults, or even worse, bankruptcies on your credit file because they want to be sure you’ll pay back any money you borrow from them.

Now, the term “financial hardship” sounds scary and is often something no one wants to admit they’re experiencing, but it’s nothing to be ashamed of. It might be something minor such as paying a bill late because you were paid late this month.

Of course, financial hardship can also be quite serious and it can happen to anyone. Losing your job, being involved in an accident, falling ill, or being affected by a natural disaster are just a few examples of situations that can have a long term impact on your ability to repay your debts. If your personal circumstances have changed drastically, get in touch with your credit providers to discuss your situation. Despite what you may think, your credit providers want you to repay your debts and will often try to help you do so.

Talking to your credit providers and requesting financial assistance can not only help you get back on track, it may also prevent your credit providers from noting a default on your credit file or sending your debts to a debt collection agency. Most credit providers have dedicated financial hardship teams that can offer you support and walk you through the different options available depending on your individual circumstances.

It’s a good idea to have a clear picture of all your income and expenses ready when requesting financial assistance. Knowing how much you’re getting paid, what bills you have and when they’re due can help your credit provider understand where you stand and how they can help you.

They may be able to offer you a repayment holiday where your credit provider pauses your repayments and defers them to a later date when you’re back on your feet. Alternatively, they may be able to temporarily switch you over to interest-only repayments or extend the term of your loan.

If your credit provider rejects an application for hardship, then they must specify the reasons behind their decision. It is also worth noting that if you are not satisfied with the reasons or believe they are unfair, you can make a complaint to an external dispute resolution scheme.

Debt consolidation is another approach that can be taken. Ever find yourself under a mountain of loans, all paying different and sometimes higher interest rates, with different due dates in any given month? It would be pretty easy to lose track of your repayments. Consolidating your debts into one loan with a lower interest rate can help you save in interest, fees and charges. It can also be much easier to manage, saving you time and limiting the risk that you make a late repayment or forget to make a repayment. Of course as with any financial product you should do your research, look at reputable providers and thoroughly read the product documentation before making an application or signing a contract.

If you find yourself in a difficult spot, you don’t have to go through it alone. There are many resources you can access to help overhaul your finances. ASIC’s Money Smart website and initiatives such as Debt Self Help and Doing It Tough can provide you with useful information about financial hardship. You can also talk to a financial counsellor who can provide you with free, independent and confidential advice to help you get your finances in order. For more information about these services, check out Credit Savvy’s Key Resources page here.

Have you got a tip about how to protect your credit reputation? Share it with us in the comments below.

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