The Financial Services Commission announced on the 29th that it will implement a credit amnesty for up to 3.7 million ordinary citizens and small business owners who have fully repaid small overdue debts starting from the 30th. The targets are individuals (including self-employed business owners) who overdue debts of up to 50 million Korean won between January 2020 and last August and fully repay them by December of this year. Approximately 2.577 million individuals, including those who have already fully repaid overdue loans incurred during this period, will have their delinquency history immediately deleted starting from the 30th. Additionally, approximately 1.126 million individuals who have yet to repay their overdue amounts will be eligible for credit recovery support without a separate application if they fully repay by the end of the year.
According to the Financial Services Commission, an analysis of the credit recovery support effects for those who fully repaid their overdue amounts by the end of last August showed that the average individual credit score (out of 1,000 points) increased by 40 points, from 616 to 656. Notably, the average credit scores of those in their 20s and 30s rose by 50 and 42 points, respectively, demonstrating the effect of supporting the rejuvenation of the younger generation. The Financial Services Commission anticipates that this measure will enable approximately 290,000 people to newly issue credit cards and about 230,000 people to exceed the average credit score required for new bank loans. Additionally, the credit scores of self-employed business owners are expected to rise by 31 points, from an average of 696 to 727, allowing approximately 20,000 individuals to qualify for first-tier financial institution loans.
However, it was found that one in three individuals who received past credit amnesties fell back into debt and failed to repay it. During the COVID-19 pandemic, the Moon Jae-in administration granted large-scale credit amnesties to approximately 2.5 million people in 2021, while the Yoon Suk-yeol administration provided additional amnesties to about 2.9 million people last year. An analysis of data from credit rating agencies NICE Information Service and Hanguk Pyeongga Data revealed that 955,559 individuals (33%) out of the 2,867,964 who received credit amnesties became loan delinquents again (as of the end of July).
