Quick answer
The OAIC says defaults stay on your credit report for five years, repayment history for two years, court judgments for five years and serious credit infringements for seven. Paying a default does not remove it, but your report shows it as paid. Lenders weigh recent conduct heavily, so the clock helps.
Key points
- Defaults are kept for five years, even after they are paid, according to the OAIC and Moneysmart.
- Moneysmart says a default can be listed when a debt of $150 or more is 60 or more days overdue.
- Repayment history is kept for two years, and a late payment is one not made within 14 days of the due date.
- Financial hardship information is deleted after one year.
- A default is not always the end of the road for a loan, because lender policies differ.
How long do defaults stay on your credit file?
Five years. That is the figure the OAIC publishes for defaults, and Moneysmart confirms that a default remains listed for five years even once it has been paid. Paying it changes how it reads, because the report will show the default as paid, but it does not bring the listing forward.
A default is a serious listing. Moneysmart says overdue payments of $150 or more that are 60 or more days late can be listed, and once listed they are kept for the full five years. It is different from a late payment, which sits in your repayment history and drops off sooner.
What are the retention periods for everything on my report?
| Item | How long it is kept |
|---|---|
| Default | 5 years |
| Credit enquiry | 5 years |
| Court judgment | 5 years |
| Repayment history (including late payments) | 2 years |
| Financial hardship information | 1 year |
| Serious credit infringement | 7 years |
| Bankruptcy | The later of 5 years from the day you became bankrupt, or 2 years from the day it ended |
Those periods come from the OAIC. Two points are worth underlining. First, they are maximum retention periods, so the listing can disappear on or after the date but not before it. Second, the periods start from the listing or event, so a default that happened three years ago is not a five-year problem from today.
What counts as a late payment?
Moneysmart says repayment history covers the last two years and that a payment counts as missed when it is not made within 14 days of the due date. So paying a day or two after the due date is unlikely to be reported, while going past two weeks can be. A late payment is a smaller blemish than a default, but several in a row can slow down an application.
If you are short of money, speak to the lender early. Moneysmart advises asking about a hardship arrangement and notes that it does not affect your credit score. If you keep to it, you are shown as up to date, and the listing is deleted after 12 months.
Does paying a default make it go away?
No, and it is worth being straight about this because some online offers suggest otherwise. A paid default:
- Stays on your report for the full five years.
- Shows as paid, which many lenders treat more kindly than unpaid.
- Is not something a credit repair company can remove if it was listed correctly.
Moneysmart warns that credit repair companies can only ask for wrong information to be removed, a step you can take yourself at no cost. It also advises checking that any such company is licensed on ASIC’s professional registers and cautions that unpaid fees to a repair company can lead to a new default. If a default is wrong, our guide on how to fix a mistake on your credit report explains the process.
How do lenders treat defaults?
Differently, and that is the useful part. Lenders weigh several things:
- Age. A default from four years ago followed by clean conduct reads very differently from one last month.
- Size. A small utility or phone account default is not the same as a large loan default.
- Status. Paid or unpaid.
- Cause. A one-off event such as illness, redundancy or a relationship breakdown tells a different story from repeated missed payments.
- Everything else. Income, deposit or equity, savings and the security on offer.
Banks and some larger lenders tend to apply tighter rules. Others, including non-bank and private lenders, may look at the full picture. Our non-bank lenders explained guide shows how those differences work.
Who suits this guide?
It is aimed at people who:
- Have a default and want to know when it will drop off.
- Are deciding whether to wait or apply now.
- Are rebuilding after financial hardship, a business failure or a relationship breakdown.
- Have been declined and suspect a listing is the reason.
- Want to understand the difference between a late payment and a default.
Should I wait until a default drops off before I apply?
Not necessarily, and the answer depends on what you need. Waiting out the clock is a legitimate strategy if you are not under time pressure and can use those months to build clean conduct. But waiting is not always practical. A settlement date, a business opportunity or a rate-sensitive refinance may not hold off.
In an illustrative scenario with no real names, a borrower has a paid default from three years ago and a clean record since. She wants to refinance a home loan that has become expensive. A lender with a strict default policy declines her, but a different lender accepts a written explanation, proof of payment and steady repayments. Same file, different policy. That is why a conversation with a broker before applying can save an unnecessary enquiry. Our guide on how to improve your credit before applying sets out the practical steps while you wait.
What can I do right now to strengthen my file?
- Get your reports from the credit reporting bodies and check dates and amounts. The OAIC says you are entitled to one free copy every three months from each body.
- Correct anything wrong. The OAIC says that if a provider or body agrees information is wrong, it must take reasonable steps to correct it within 30 days.
- Pay any outstanding listed debts and ask for written confirmation.
- Set up automatic payments so nothing slips past 14 days again.
- Avoid unnecessary new credit applications, since enquiries stay on file for five years.
- Write a brief factual explanation of what happened, which a broker can present with your application.
How does Ownright approach loans with defaults?
We start by reading the report with you, then work out which lenders are open to your type of listing. Trevor Scott has more than 40 years in finance and the team has helped people across Australia whose files did not pass a bank’s automated check. Depending on the situation we may look at bad credit home loans, private loans with bad credit, business loans with bad credit or bad credit car loans, and in some cases a short-term solution while the file heals.
We do not promise approval, but we will tell you honestly what is realistic.
Mistakes to avoid
- Believing that paying a default erases it.
- Paying someone to remove a correct listing.
- Applying everywhere after a decline, which adds enquiries.
- Ignoring a small debt that could roll into a default.
- Missing the 14 day mark on repayments you could easily have made on time.
How do I get a default listed correctly or not at all?
If a debt is genuinely yours and genuinely overdue, the listing is lawful, and the best response is to deal with the debt. If you believe the listing is wrong, there are good grounds to challenge it: the amount is wrong, the debt was settled, the account was never yours, or a dispute was already under way when it was listed. Moneysmart lists defaults listed during a dispute and unrecorded payment plans as examples of lender errors. The OAIC says that once the provider or body agrees information is wrong, a reasonable-steps correction must follow within 30 days. Keep emails, statements and settlement letters, because they are the evidence.
If you cannot agree, the lender or body must explain its reasons in writing, and Moneysmart points to AFCA for free and independent dispute resolution.
What about defaults from a business or a guarantee?
Business owners sometimes find that a personal file carries a listing connected to a business debt, such as a personal guarantee called on after a business closed. Lenders reading a personal file will see it regardless of whose name the business traded under. If that is you, collect the paperwork showing how the debt arose and how it has been resolved, because a clear story helps. It is also worth checking whether commercial credit information appears on a separate business report from the one in your name.
Our business loans with bad credit page describes how we look at business files with blemishes, and our guide on business loans with bad credit goes further.
Can I borrow while the default is still on file?
Sometimes, yes. How easy it is depends on the same factors lenders always weigh, plus the extra question of how the default arose. Borrowers with a paid default, a clean record since, a decent deposit or equity, and stable income are often in a stronger position than they expect. Security matters too. A loan secured against property is assessed differently from an unsecured one, which is why secured options such as a second mortgage or a private first mortgage can come into play for people who have been declined elsewhere. Our guide on how to refinance when your bank says no walks through the usual routes.
We never suggest borrowing more than you can comfortably repay. A loan that fits is better than a loan that merely gets approved.
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Frequently asked questions
How long does a default stay on my credit file?
Five years, according to the OAIC. Moneysmart adds that this holds even after you pay the debt: the default stays listed, but your report shows it as paid. The five years is counted from the listing date, so the best use of that time is a clean run of on-time repayments.
How long do late payments show on my report?
Repayment history, which includes late payments, is kept for two years, according to the OAIC. Moneysmart explains that a missed payment is one not made within 14 days of the due date. A single late payment is generally less serious than a default, but a pattern gets noticed.
Does paying off a default remove it?
No. Moneysmart is clear that a paid default stays on your report for its full period and shows as paid. That still helps, because lenders usually view a settled debt more favourably than an unpaid one. Getting a written confirmation of payment is worth doing.
Can I get a home loan with a default?
It can be possible, depending on the lender, the size and age of the default, whether it is paid and your conduct since. Some lenders decline recent defaults outright while others consider them with a clear explanation. Matching the file to the right lender is the main task.
What is a serious credit infringement?
It is a listing that suggests a person has acted fraudulently or shown an intention not to comply with credit obligations. The OAIC says it stays on a credit report for seven years. It is treated more seriously than an ordinary default, so anyone seeing one should get advice before applying.