You might be considering a Part 9 Debt Agreement if you are struggling with unmanageable debt to help pay them off. Make sure you know how being in a Part 9 Debt Agreement will affect your Credit File. Your credit file is a record of your financial habits and determines your risk rating for future loans. Having a default on your credit file, such as late payments, can make it difficult to secure a loan. It’s no wonder that you would want to protect it.
A Part 9 Debt Agreement is a government legislated agreement which allows you to reduce the overall amount of debt you owe. It also freezes the interest and fees over the repayment term, which is usually five years. You will be left with one affordable, manageable repayment. A Debt Agreement will also be noted on your credit file for five years, much like a default.
If you are struggling to make your repayments and you are feeling the stress of being harassed by creditors, a Part 9 Debt Agreement may be an option to relieve this stress.
Do you already have a default on your credit file?
Chances are you have at least one default on your credit file, if you are behind in repayments and being harassed by creditors, A default will last for five years and while it is on your credit file it can be difficult for you to access credit through a loan or line of credit.
To check if you have received a default on your credit file, you can request a copy of your credit file through a credit reporting body listed here. Your credit file will have a record of your debts and list any defaults and judgements against you.
How will a Part 9 Debt Agreement affect your credit file?
The day you enter a Part 9 Debt Agreement, a financial default is marked on your credit file, where it will be listed for five years. Every time you apply for a new loan or a credit card during this five year period, the creditor will be able to see that you are in a Part 9 Debt Agreement and will note you as a high risk client, making it difficult for you to secure a loan.
However, this is also why it is a bulletproof system designed to protect your credit file. How? For five years, all of your unsecured debts will be repaid through an affordable agreement. This prevents you from accumulating further defaults on unsecured debts and therefore won’t affect your credit file for more than five years.
At the end of five years, your unsecured debts will have been repaid and your credit file will be clear, allowing you to start fresh.
What happens once the Part 9 Debt Agreement is complete?
The original default will be removed once you complete your Debt Agreement. It may take 3-6 months for your credit score to build back up as you show healthy financial habits.
Once you have repaid your debts via a Part 9 Debt Agreement, you can rebuild your credit score.
For example, by applying for a small loan, one which you know you can afford the repayments for. Paying this small loan off will improve your credit score, putting you in a better financial position. This allows you to be able to borrow from major financial institutions with no problem.
Common Concerns with Part 9 Debt Agreements
I want to buy a house within the next five years.
It’s fantastic to set financial goals and they encourage you to figure out a budget and properly manage your money. Completing your Debt Agreement improves your credit file bringing you one step closer to successfully applying for a home loan. You can the achieve the homeowners dream!
Should I just declare Bankrupt?
Part 9 Debt Agreements do not carry the same restrictions as Bankruptcy, and if you have a high income or assets, a Part 9 Debt Agreement is a way of avoiding this.
I don’t need a Part 9 Debt Agreement; I just want to consolidate.
A debt consolidation loan is essentially a personal loan that you take out to cover your debts. You can then move forward just making the one repayment. However, if you have a default on your credit file, you may not be successful in getting in a personal loan. This is when you should consider a Part 9 Debt Agreement, and begin your journey to financial freedom.
To learn more about Part 9 Debt Agreements, visit here or give us a call on 1800 00 3328. Our friendly Case Managers will be able to provide you with more information, advice and assistance.