(Yicai) Dec. 22 -- China’s central bank will implement a one-time credit reset next year, hiding small pandemic-era defaults from the records of borrowers who fully repay the debt.

Any single overdue loan of up to CNY10,000 (USD1,420) incurred between Jan, 1, 2020 and this Dec. 31 will no longer appear on the central credit reporting system if fully repaid by the end of next March, the People's Bank of China announced today.

This marks the first major reset since the nationwide central credit reporting system launched in 2006. The system holds data on 1.16 billion people, including 810 million with active credit records. The PBOC has not said how many people will benefit nor how many records are eligible.

The measure will keep negative credit entries in the system but hide them from reports, protecting individuals from long-term damage caused by minor pandemic-era defaults, PBOC Governor Pan Gongsheng said in October.

At the moment, borrowers with poor credit records can have their loan applications rejected, credit card limits reduced, cards canceled, and access to preferential interest rates denied. Severe delinquencies can result in individuals being listed as “dishonest persons subject to enforcement,” affecting their personal travel arrangements and children’s school admissions.

The credit reporting system will automatically identify and update records, so eligible individuals do not need to apply nor submit documentation. The process is free of charge and does not require any third-party agency or additional service, so individuals should be wary of potential scams, the PBOC warned.

Borrowers can check their credit records online via bank mobile apps, internet banking, UnionPay, or the Credit Reference Center’s official website. Offline, records are accessible through self-service inquiry machines, smart teller machines, and at service counters.

The policy applies to all types of loans -- personal business loans, mortgages, consumer loans, and credit card debts -- as long as the relevant conditions are met, and to all types of lending institutions connected to the PBOC's credit reporting system, from banks to microfinance and consumer finance firms.

If a borrower has multiple overdue payments, the policy will apply only to those that meet the criteria and are paid off. Outstanding debts that go unpaid will still show on credit reports. The PBOC also pointed out that this one-off credit reset does not constitute a clean slate nor debt forgiveness.

The policy is intended to help individuals who face genuine financial difficulties but are making proactive efforts to fulfill their obligations, an expert told Yicai, adding that it is a one-off event and any new overdue records arising after 2026 will still be recorded and handled according to standard regulations.

Editor: Futura Costaglione