The credit myth stopping Australians from getting help

Afraid to tell your lender you're struggling? Experts warn avoiding the conversation could hurt your credit far more than seeking hardship support.

With the latest interest rate hike, millions of Australians are quietly doing the maths on their monthly expenses.

Combined with rising fuel and grocery costs, budgets are stretching further than ever. But for those who need it, help doesn't have to feel out of reach.

At this stage, it's important to know your options and be confident in making decisions.

While this is a less-than-ideal position to be in, there is no need to be fearful - lenders have programs in place to help.

Financial hardship assistance is available for Australians who need some extra support when it comes to meeting their loan obligations.

If you are hesitating out of fear that this type of assistance will impact your credit score, we have good news.

Why avoiding your lender can hurt your credit more

Many people believe that accessing hardship support automatically harms their credit health.

When you're already stressed about money, this can be a scary thought, as the last thing you want is to make things worse.

Rather than seeking financial hardship arrangements with their lenders, some people decide to skip payments in the hopes that things will improve. Others may apply for a new credit card to bridge the gap.

The truth is that missed payments, additional credit applications, and new lines of credit are far more likely to damage your credit report than simply picking up the phone and talking to your lender about your circumstances.

The biggest risk is not asking for help, it's doing nothing.

Why asking for help could protect your credit

When you enter a formal hardship arrangement with your lender, it may be noted on your credit report.

But here's the nuance that matters: it shows proactive financial behaviour, not failure.

Hardship support can take several forms: reduced repayments, temporary payment deferrals, repayment pauses, or permanent variations to a loan agreement.

While these arrangements may be noted on your credit report, they will not negatively impact your credit health.

In fact, it often signals to other lenders that you have recognised your situation and responsibly taken steps to improve it.

The sooner you contact your lender, the more options are typically available to you and the less likely you will be to make decisions that really will impact your credit health.

What really affects your credit over 24 months

Your credit report keeps a 24-month record of how you manage repayments on credit cards, personal loans, car loans and home loans.

While a single missed payment may not have a major impact, repeated missed payments can signal to future lenders that managing ongoing credit commitments may be becoming difficult.

A history of consistent payments, or proactive communication with your lender when issues arise, is generally viewed far more favourably than missed payments without explanation.

Similarly, applying for multiple credit products in a short period of time leaves a five-year footprint on your credit report.

Any surge of applications can make you look financially overextended, and this is why it can be detrimental to apply for new lines of credit to cover your expenses instead of asking for hardship assistance.

Not all Buy Now Pay Later accounts are reported through on credit reports, so the missed payments won't immediately show on your report.

However, lenders can still see enquiries for BNPL accounts, and multiple applications in a short period may affect how your overall creditworthiness is assessed.

Why checking your credit report could save you money

One of the most practical things any Australian can do right now is to check their credit report.

Think of it less as a scorecard and more as an active financial management tool: a free, clear snapshot of your credit activity that lets you understand where you stand, track your progress, and catch any errors before they become problems.

Even though you can access your credit report for free every three months through credit reporting bodies such as Equifax and Experian, nearly half of all Australians have never checked their credit report at all.

Reviewing your credit report regularly means you're informed on your credit health before you need to be, and ensures that you can dispute anything that looks inaccurate.

Hardship support is designed for moments like this

Financial hardship arrangements exist precisely because lenders understand that life is unpredictable.

They are part of the solutions system designed specifically to help people through temporary challenges, not to penalise them for experiencing difficulty.

Free and independent support is also available.

Community legal centres can also provide guidance at no cost, and these services exist to help people navigate exactly the kind of pressures many households are facing right now.

If you're experiencing financial difficulties, you should:

• Contact your lender as early as possible, before you miss a payment.
• Check your credit report for free every three months through Equifax or Experian.
• Visit CreditSmart.org.au for independent information on credit reporting and hardship options.
• Seek free financial counselling through a financial counsellor (National Debt Helpline) or a community legal centre if you need independent support.
• Avoid applying for multiple new credit products while under financial pressure.

The worst outcome is to do nothing and hope the problem resolves itself. Pick up the phone, call your lender, and start a simple conversation.

Asking for help when you need it will ensure that you can get through periods of financial hardship without impacting your credit health for years to come.

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