Recently, the financial industry is reaching a new turning point in credit amnesty by signing a ‘joint agreement with the financial sector to support credit recovery for low-income people and small business owners.’ Under this agreement, it is expected that many loan delinquents will benefit from delinquency history deletion. In this article, we will take a closer look at the expected effects and eligibility criteria for credit amnesty and learn more about what changes these measures will bring to individuals and the financial market.
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What is credit pardon?
Credit amnesty is a measure that allows individuals to resume normal financial activities by removing delinquent financial records. Our government also uses the term ‘credit recovery’.
Necessity of credit pardon
🔻 Before talking about the need for credit forgiveness, we recommend that you watch the video below first.
Credit pardon video
Negative impact of late payment history
If you fail to repay your loan or credit card balance on time, your delinquency record is shared with financial companies. Depending on the amount and duration of the delinquency, this record can remain for up to five years, negatively affecting your credit score and impeding financial transactions.
stigma effect
A situation where past delinquency records remain even after debt repayment causes a ‘stigma effect’ in financial transactions. In other words, your credit score will drop due to your past delinquency history, which will make it difficult to get a loan or card.
Expected effects of credit forgiveness
1. Increased credit score
Through credit forgiveness, approximately 2.5 million delinquent borrowers can expect their credit scores to increase by an average of 39 points. This means an opportunity to convert to low-interest loans through refinance loans, and also improves accessibility to credit card issuance and new loans.
2. Improved accessibility to card issuance and loans
It is expected that 150,000 delinquent borrowers will be able to receive credit cards by meeting the minimum credit score standards, and 250,000 people will have new loan opportunities by exceeding the average credit score of new borrowers in the bank.
Check criteria for credit pardon
1. Focus on small delinquent borrowers
Among those with small delinquencies incurred between September 1, 2021, and January 31, 2021, those who have repaid the loan in full by May 31 are the main target. Here, the standard for small delinquency is 20 million won or less.
2. Restrictions based on the number of days overdue
For long-term delinquents exceeding 90 days, it is difficult to receive credit forgiveness benefits if the loan principal exceeds 20 million won.
For example, if you borrow 25 million won and then pay 3 million won in arrears for 4 months, 28 million won in arrears will be registered and you will be excluded from the amnesty benefit.
How to apply and confirm credit pardon
You can check whether you are eligible for credit forgiveness through a verification system established by CB companies, etc. The system will be available as early as March.
🔻 We will continuously check the site and provide updates in the link below.
👉 Confirm credit pardon application
Even though you have repaid the full amount, if you are not eligible for credit recovery support due to misregistration by the financial company, you can request correction through the financial company. For more information, please contact the Credit Recovery Committee.