If you are struggling with your debt and are unable to pay your bills – or you were struggling in the past – you might find that you have a default listed on your credit report.
Once a default has been listed it does not get removed simply because you pay back the debt.
If you have had a default listed, you can still improve your credit report a little bit by making sure the debt is paid or settled. If that happens, the credit provider has to update your credit report to say that the debt is no longer owed by you. Also, if you have other loans and are able to continue paying your repayments on time for those loans, that good repayment history may help to reduce the impact of the default on your credit report and credit score.
Situations when a default may be removed
There are a small number of situations when a default listing can be removed from your credit report. These situations are limited to when the credit provider has made a mistake when listing the default, or the overdue payment happened because of something outside of your control (like a natural disaster or bank error).
In order to work out whether you can ask for the default to be removed, you should get a copy of your credit report from the credit reporting bodies. It’s FREE to get a copy from each credit reporting body once a year, or if you've applied for credit and been refused in the last 90 days.
If you think the default listing is incorrect, you can get help to have it removed for FREE.
The first step is to raise your concern with the credit provider or credit reporting body. If they don’t help you, you can raise your concern with the credit provider or credit reporting body’s external dispute resolution service; these are independent bodies who look into complaints. You have the right to do this for free.
If you need help, you can ask a financial counsellor or community legal services for advice. Financial counselling is free, independent and confidential.
Below a breakdown of scenarios where a default will be removed from your credit report:
The debt wasn’t yours
A default can be removed if the debt wasn’t even yours. This could happen if there’s a simple case of mistaken identity or someone has fraudulently taken out the loan or bought something on credit in your name.
The credit provider didn’t send you the correct written warnings - at the right time
Before listing a default on your credit report, the law requires the credit provider to send you written warnings. If you don’t think you received the written warnings, talk to your credit provider and ask them to give you copies. Did your address change recently? The credit provider has to send the warning to your last known address, so think about whether you told the credit provider your new address.
You had asked for hardship assistance
If you are struggling with your debt, you can ask your credit provider to help you. This is known as a request for “hardship assistance”. Once you have asked for hardship assistance, the credit provider has to respond to you in writing. The credit provider can’t list a default while they are thinking about your request and for 14 days after telling you the outcome. If the credit provider listed the default before 14 days had passed, then it may be removed. You’ll need to be able to show that you actually made the request for hardship assistance.
The default happened because of something outside of your control
This could include things like natural disasters or an error by a bank in processing a direct debit payment. You’ll need to explain why the default was an unavoidable consequence of something happening that was beyond your control, and show that you’ve made arrangements with the credit provider to pay the overdue debt.
The debt was from a long time ago and is ‘statute barred’
A debt may be statute barred if you haven’t made any payments to it for a number of years. For most debts this is 6 years, but it can depend on what state or territory you live in and what type of debt it is (a home loan is usually longer). This can be quite complicated; if you think this may apply to you, you really should get some legal advice. You can ask a community legal service for free advice.