Understand the difference between a debt and a credit, how to manage credit and what to do if you’re in financial difficulty.

Give me the main points

  • A credit is a type of debt where the borrower receives something of value now and agrees to repay the lender at a later date.
  • Credit can be more expensive than using your own money because you’re usually charged interest and fees on the money you owe.
  • Credit comes in many different shapes and sizes including mortgages, loans, credit cards, store cards, and even goods and services that you agree to pay for later.
  • Whatever credit you choose, it's important to keep up with your monthly repayments.
  • If you’re struggling to meet your loan repayments or pay your bills, contact your lender or service provider to discuss your options.
  • Think twice before using credit repair companies that claim to improve your credit history and charge thousands of dollars for it.

Different types of credit

Credit can include:

  • car and home loans
  • credit and store cards
  • education loans
  • hire purchases
  • short term or ‘pay day’ loans
  • a mobile phone
  • internet services
  • electricity or gas
  • water services.

Managing credit

When you agree to repay credit, you’re responsible for repaying the money you owe under the terms of any contract you make. This is true for both your mobile phone contract and a large debt like your home loan.

Before you borrow money and agree to a credit contract:

  • Compare loans, credit cards, energy offers and other types of credit to get the most affordable deal.
  • Work out the repayments before you agree to borrow money and make sure they fit into your budget.
  • Check your credit history by getting a credit report
  • Read the contract, ask questions if you don’t understand it and get independent legal advice before you agree to anything substantial like a home loan.

If you’ve never borrowed money before, we recommend checking out MoneySmart’s Borrowing basics.

Once you’ve agreed to your credit contract (including utility and service contracts), it’s important to make repayments on time. If you don’t repay the credit as you’ve agreed there might be financial impacts such as late payment fees. It can also affect your credit record and future credit applications.

When you apply for credit, get a mobile phone contract or agree to a contract with an energy company this information goes on your credit file and becomes part of your credit history .

Financial difficulty

If you’re struggling to meet your loan repayments or pay your bills, it’s always a good idea to contact your lender or service provider and let them know what’s happening. You may be eligible for hardship assistance or a repayment plan.

We understand that life can take unexpected turns. If you're finding your loan or credit card repayments difficult to make we may be able to offer assistance when you need it most.

The best way to let us know about your situation is to contact NAB Assist.

Financial Counsellors Australia is a free, confidential service to assist people in financial difficulty. Financial counsellors are qualified professionals who can provide you with the information, support and advocacy to assist you with your financial situation.

Credit Repair

It might sound like a good idea to pay someone to help you fix your credit history, but credit repair agencies may not always be able to do what they claim. In most cases, default listings and other historical information cannot be removed from your credit report unless they are proven to be wrong. ASIC’s Money Smart site has some helpful information on what credit repair companies can and can’t do.

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