What Is a Credit Amnesty?

Credit amnesty has several potential meanings, depending on the context. It may refer to a person's credit score, which lenders and some service providers use to determine credit worthiness. It may also refer to a student's academic credit history. In all cases, it means forgiveness of an individual's poor recorded history.

Credit Scores

Credit report agencies maintain and update your credit details so prospective lenders and service providers can check whether you are likely to pay them. When you make your loan and bill payments on time, credit report agencies increase your credit score. When you fail miss your payments, your credit score drops. With a high credit score, you find it easy to get a loan and certain services at low prices. With a low credit score, lenders and service providers may reject your application or charge high fees for their services.

Government Amnesty

A credit amnesty from a government involves a great shift in the credit scoring system. In such a plan, the credit rating agencies reset people's credit scores. This allows individuals with bad credit to restore their credit scores and regain their abilities to obtain loans and services at low prices. Proponents of a government credit amnesty argue that helping individuals out of credit history problems would help stimulate the economy.

Lender Amnesty

Companies that offer financing for customers who buy their products sometimes run promotional credit amnesty programs. Under this program, customers with bad credit can obtain financing from the company. However, these customers may have to meet some eligibility criteria, such as having made prompt payments on a previous loan for a certain period of time. Even under such a program, these customers may still have to pay higher interest fees compared to customers with good credit.

Academic Credit Amnesty

Also known as academic amnesty, credit amnesty in the academic sense refers to the restoration of a student's academic record. The student usually has to consult an adviser at the education institution before being granted a credit amnesty. He also has to meet some requirements, such as having had a break in attendance for a minimum amount of time and having completed certain courses. The education institution may limit the number of credit amnesties a particular student can get.