Financial Hardship & Your Credit File in Australia (2026)

Quick Answer: Financial hardship — job loss, illness, divorce, reduced income — does not automatically destroy your credit file in Australia. What happens depends on what your lender does and whether you communicate proactively. Formally approved hardship arrangements are recorded on your credit file as hardship notations — visible but not scored as negatives in the same way as defaults. Missed payments without a hardship arrangement create negative CCR repayment markers. Defaults (debt $150+, 60+ days overdue) are the most damaging event and require a Section 21D notice under the Privacy Act 1988 before listing. If a lender listed defaults or negative entries against you during a hardship period without following proper procedure, those entries can be disputed and removed. Australian Credit Solutions — 98% success rate. No Win No Fee. ASIC ACL 532003. Industry Excellence Award 2022, 2023 & 2024. 4.9/5 from 976+ reviews. Over 5,000 Australians helped since 2014.

Financial hardship is one of the most emotionally charged situations anyone faces. Understanding your credit file rights during difficulty is critical — and most Australians don't know them. For more, see our guide on centrelink debt & your credit file in australia.

The Three Outcomes for Your Credit File During Hardship

How your credit file is affected during financial hardship depends entirely on the path taken:

The difference between outcome 1 and outcome 3 is almost entirely about whether you communicated early and whether the lender followed proper legal procedures.

Your Legal Right to Request Hardship Assistance

Under the National Consumer Credit Protection Act (NCCP) and the Banking Code of Practice, you have the right to request financial hardship assistance from any licensed credit provider. This applies to:

• Home loans and mortgages
• Personal loans and car loans
• Credit cards
• Business loans (in some circumstances)
• Buy Now Pay Later (since June 2025 regulations)

When you formally request hardship assistance, your lender is legally required to:

1. Acknowledge your request in writing within 21 days
2. Consider your request genuinely
3. If they agree to a hardship variation — document it in writing
4. Not list a default during the period of genuine hardship assessment

The key: You must make the request in writing and keep a copy. "I called and told them I was struggling" is not the same as a formal hardship request in legal terms.

What a Hardship Notation Looks Like on Your Credit File

When a lender approves a formal hardship arrangement — reduced repayments, repayment pause, interest-only period — they report this to the credit bureau. On your credit file, this appears as a hardship notation alongside the account. For more, see our guide on nils scheme australia: how to apply & credit impact.

Hardship notations:

• Are visible to lenders who access your file
• Are not scored negatively in the same way as missed payments or defaults
• Remain for the duration of the hardship arrangement
• Are removed when the arrangement ends and normal repayments resume
• Do not extend the 5-year retention period for any negative listing

Some lenders interpret hardship notations differently in their own credit assessments — a home loan lender may ask about current or recent hardship arrangements as part of their manual assessment. But it is far better to have a hardship notation than a string of missed payment markers or a formal default.

What Happens If You Don't Request Hardship Assistance

If you stop paying without contacting your lender:

Weeks 2–4: Payment recorded as "14+ days late" in your CCR repayment history. Minor score impact.

Month 2: Payment recorded as "30 days late." Moderate score impact.

Month 3: Payment recorded as "60 days late." Significant score impact. Lender begins default process.

Month 3–4: If the debt is $150+, lender is required to send a Section 21D written notice to your current address. This notice gives you 30 days to respond before a formal default is listed.

Month 4–5: If you don't respond to the Section 21D notice, a formal default is listed on your credit file. Score impact: 80–200+ points. Retention: 5 years.

The entire sequence from missed payment to formal default typically takes 3–5 months. Contacting your lender in week 1 can prevent all of it.

The Section 21D Notice — Your Most Important Protection

The Section 21D notice under the Privacy Act 1988 is a written notice the lender must send to your current address at least 30 days before listing a formal default. It must:

• State the amount of the default
• Advise you that a default will be listed on your credit file
• Give you 30 days to respond or make payment arrangements

If the Section 21D notice was sent to the wrong address — a previous home, an old email address, an address you'd updated months earlier — the default listing is potentially unlawful and can be disputed for removal.

This is one of the most common grounds Australian Credit Solutions uses to remove defaults from clients' credit files. Address errors in lender records are remarkably frequent, particularly for people who've moved during financial difficulty.

Case Study: Marcus, Adelaide — Hardship Default Removed Due to Notice Failure

Marcus, 39, a construction worker from Prospect, suffered a serious injury in 2023 that left him unable to work for 7 months. His income reduced to Workers' Compensation payments. He contacted his car loan lender (Latitude Financial) in writing requesting hardship assistance and received an acknowledgment email. However, the formal hardship variation was never confirmed in writing by Latitude, and after 3 months, a default was listed on his credit file.

The default had been listed while Marcus's hardship request was still technically unresolved — Latitude had acknowledged receipt but not formally responded with approval or denial within the 21-day legislative window. Additionally, the Section 21D pre-listing notice was sent to Marcus's previous address, as he'd temporarily moved in with family during his recovery and had not updated the address with Latitude.

Australian Credit Solutions lodged a dispute on two grounds: (1) default listed during unresolved hardship request in breach of the Banking Code of Practice, and (2) Section 21D notice sent to incorrect address. Latitude removed the default within 49 days. Marcus's score improved from 441 to 598. Car finance refinance approved 2 months later.

Marcus paid nothing until we succeeded.

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Step-by-Step: How to Protect Your Credit File During Hardship

Step 1: Act before you miss a payment Contact your lender the moment you know you'll struggle — not after you've missed two months. The earlier you communicate, the more options you have.

Step 2: Submit a written hardship request Don't just call. Email or write to your lender's hardship team. State: your name, account number, the nature of the hardship, how long you expect it to last, and what arrangement would help (reduced payments, payment pause).

Step 3: Keep every communication Save every email, letter, and written response. If there's a dispute later about what was agreed, your documentation is your protection.

Step 4: Follow up if you don't hear within 21 days Lenders are required by law to respond to hardship requests within 21 days. If you haven't heard back, follow up in writing and document the follow-up.

Step 5: Check your credit file 60 days after the arrangement is resolved Confirm no incorrect entries were made during or after the hardship period. Lenders sometimes make data errors when removing hardship notations or updating account statuses.

Free Help Available During Hardship

If you're struggling financially and need free assistance:

• National Debt Helpline: 1800 007 007 — free financial counsellors
• AFCA (Australian Financial Complaints Authority): afca.org.au — if your lender refuses a reasonable hardship request
• MoneySmart (ASIC): moneysmart.gov.au — financial hardship resources
• Australian Credit Solutions (if negative entries have already been listed incorrectly): free assessment at no cost until we succeed

Frequently Asked Questions

Does financial hardship affect your credit score in Australia? Financial hardship itself isn't listed on your credit file. What affects your score is what happens during hardship: missed payments create CCR late payment markers (2-year visibility), formal hardship arrangements create hardship notations (minimal score impact), and defaults created without proper procedure create severe score damage (5-year listing). Proactive communication with lenders before missing payments is the most powerful credit file protection during hardship.

What is a hardship notation on a credit file? A hardship notation is a marker added to your credit file account when a lender approves a formal hardship arrangement (reduced repayments, repayment pause, interest-only period). It signals to other lenders that you have a current or recent hardship arrangement. Hardship notations are not scored as negatively as missed payment markers or formal defaults, and are removed when the arrangement ends.

Can a lender list a default while you're in hardship in Australia? Not if you have an approved hardship arrangement in place. Lenders are prohibited under the Banking Code of Practice from listing defaults while a formal hardship arrangement is active. If a default is listed during an approved hardship arrangement, it can be disputed as an improper listing. Lenders may still attempt collection action and begin the Section 21D notice process if no arrangement is formalised — which is why written communication and confirmed arrangements are critical.

What happens if I ignore financial hardship and stop paying? If you stop paying without contacting your lender, the sequence is: CCR late payment markers from the first missed payment (2-year visibility), escalating to formal default listing (5-year visibility) after approximately 3–5 months. A Section 21D written notice must be sent before the default is listed. Ignoring the notice does not prevent the listing — it ensures it.

Can defaults listed during financial hardship be removed? Yes — if the default was listed improperly. Common grounds include: the Section 21D notice was sent to the wrong address, the default was listed while a hardship request was pending or unresolved, the default was listed during an approved hardship arrangement, or the amount listed was incorrect. Australian Credit Solutions assesses defaults listed during hardship periods at no cost.

How long does a hardship arrangement affect your credit file? A hardship notation remains on your credit file for the duration of the arrangement and is removed when normal repayments resume. Any missed payment markers created before the arrangement was approved remain for 2 years from when they occurred. A correctly managed hardship arrangement leaves no permanent negative trace on your file once it concludes.

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Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice.

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