How long does a paid default stay on your credit file?

A paid default stays on your credit file for five years from the date it was originally listed, not from the date you paid it. This means if a default was listed in January 2023 and you paid it in January 2025, it will remain on your file until January 2028. The payment only changes the status — it does not reset or shorten the retention period. Under the Credit Reporting Code registered under the Privacy Act 1988, the five-year clock starts from the original listing date. Australian Credit Solutions can assess whether your paid default is eligible for early removal.

Is a paid default better than an unpaid default?

A paid default is slightly better than an unpaid default in the eyes of most lenders, but the difference is less dramatic than you might hope. Both are negative listings. Some lenders view a paid default more favourably because it shows you eventually settled the debt, but many mainstream lenders — particularly for home loans — will still decline applications with any default, paid or unpaid. The only way to truly eliminate the impact is to have the default removed entirely. Australian Credit Solutions specialises in removing both paid and unpaid defaults that were listed in breach of Australian credit reporting laws.

Can a paid default be removed from your credit file?

Yes, a paid default can be removed from your credit file if the original listing breached the Privacy Act 1988 or the Credit Reporting Code. Common grounds for removal include: the credit provider failed to send the required default notice to your current address, the notice didn't include all legally required information, the default amount was incorrect, or the provider didn't wait the mandatory period before listing. These procedural requirements apply regardless of whether the debt has been paid. Australian Credit Solutions reviews each default against these legal requirements and has removed thousands of paid defaults for Australian clients.

Should I pay a default before trying to get it removed?

This depends on your specific situation. Paying a default does not improve your chances of having it removed through a legal dispute — the grounds for removal relate to whether the credit provider followed proper procedures, not whether the debt has been paid. In some cases, paying the default before seeking removal can actually reduce your negotiating leverage. However, if you need finance urgently and removal will take time, paying may be a practical step. Australian Credit Solutions recommends getting a free credit file assessment before making any payments, so you understand your removal options first.

What is the difference between a default and a paid default?

A default is a negative listing on your credit file recorded when a credit provider reports that you failed to pay a debt, typically after the amount has been overdue for at least 60 days and a written default notice has been issued. A paid default is simply a default where the debt has subsequently been settled — the status shows 'paid' rather than 'current' or 'unpaid.' Both types remain on your credit file for five years from the original listing date. Under the Privacy Act 1988, both paid and unpaid defaults can be challenged and removed if the listing process was not legally compliant. Australian Credit Solutions handles both types.

Will my credit score improve if I pay off a default?

Paying off a default may produce a small improvement in your credit score because some scoring models view paid defaults more favourably than unpaid ones. However, the improvement is typically modest — the default listing itself is still the primary negative factor. For significant score improvement, the default needs to be removed entirely. When a default is removed from your credit file, clients typically see score improvements of 100 to 250 points or more. Australian Credit Solutions focuses on full removal of defaults that were improperly listed, rather than simply changing their payment status.

Paid Defaults: Why Paying Doesn

Published: February 25, 2026Updated: February 25, 202610 min read

Key Takeaway

Paying a default is the right thing to do morally — but it doesn't remove the listing from your credit file. A paid default remains visible for five years from the original listing date. The only way to remove it early is if the credit provider breached the Privacy Act 1988 or the Credit Reporting Code when listing it in the first place.

You Paid the Debt. Why Is It Still Following You?

You scraped together the money. Maybe it took months. Maybe you borrowed from family or dipped into savings you'd been protecting. But you paid it. The debt is settled. Done. Over.

Then you apply for a home loan. Or car finance. Or even a phone plan. And there it is. Still sitting on your credit file like it never happened. "Paid default."

It feels like a betrayal. You did the responsible thing, and the system is still punishing you for it.

How Defaults Work in Australia

Under Australia's credit reporting system, a credit provider can list a default on your credit file when you owe them money that's overdue by at least 60 days and the amount is $150 or more. Before listing, they must send you a written default notice giving you 14 days to pay.

Once listed, the default stays on your credit file for five years from the date of listing. That's the rule under the Credit Reporting Code registered under the Privacy Act 1988. It doesn't matter whether you pay the debt the next day or five years later — the listing stays for the full five years.

When you pay, the status changes from "unpaid" to "paid." That's it. The default itself doesn't disappear. It just gets a different label.

Why This Matters So Much

A paid default is still a default. Most mainstream lenders treat any default — paid or unpaid — as a significant red flag. For home loan applications, many banks have a blanket policy: any default on your credit file means automatic decline.

Even lenders who consider applications with paid defaults typically charge higher interest rates. Over the life of a home loan, that can add up to tens of thousands of dollars.

And it's not just home loans. Car finance, personal loans, credit cards, rental applications — a paid default affects all of them. For five full years.

Paid a Default but Still Being Knocked Back?

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Common Myths About Paid Defaults

Myth 1: Paying the default clears your credit file

This is the biggest myth in Australian credit. Paying a default changes its status but does not remove it. The listing remains for five years from the original date. Many people pay defaults specifically believing it will clean their file — only to discover it hasn't.

Myth 2: A paid default doesn't affect your credit score

A paid default still significantly impacts your credit score. While some scoring models give a small improvement for paid versus unpaid defaults, the listing itself remains a major negative factor. The difference between a paid and unpaid default is far less significant than the difference between having a default and not having one at all.

Myth 3: You should always pay the default before trying to remove it

Not necessarily. If a default was listed improperly — without the required notice, with the wrong amount, or before the mandatory waiting period — it may be removable regardless of payment status. In some situations, paying first can actually reduce your options.

Myth 4: Defaults can only be removed after five years

Defaults automatically fall off your file after five years. But they can be removed earlier if the credit provider breached the Privacy Act 1988 or the Credit Reporting Code when listing them. This is a legal process, not a waiting game.

When Can a Paid Default Be Removed?

Under Australian law, a default — paid or unpaid — can be removed if the credit provider failed to comply with their legal obligations. Here are the most common grounds:

No default notice sent

Before listing a default, the credit provider must send you a written default notice. If they didn't send one, or it was sent to the wrong address, the listing may be invalid.

Defective default notice

The notice must contain specific information including the amount owed, a statement that the amount is overdue, and a warning that the default may be listed. If any required element is missing, the notice may be defective and the listing challengeable.

Incorrect amount

If the default amount listed on your credit file is wrong — even slightly — it may be grounds for removal. The Privacy Act requires credit information to be accurate.

Insufficient time to pay

The credit provider must give you at least 14 days from the date of the default notice to pay before they can list the default. If they listed it too soon, the listing may be improper.

Expert Tip from Elisa

"The procedural requirements for listing a default are strict and specific. In our experience, a significant percentage of defaults — including paid ones — have compliance issues that make them challengeable. Don't assume that because you owed the money, the listing is valid. How it was listed matters just as much as whether the debt existed."

A Real Scenario: How Lisa Got Her Paid Default Removed

Lisa had a $1,200 default from an old phone contract. She'd moved house and never received the bills. By the time she found out, it was already on her credit file. She paid it immediately — $1,200 she could barely afford — thinking that would fix things.

Six months later, she applied for a home loan. Declined. The paid default was still there, and her bank had a strict no-defaults policy.

When her credit file was professionally reviewed, it turned out the telco had sent the default notice to her old address — not the address she'd updated with them. Under the Privacy Act, the notice must be sent to the consumer's last known address. Since Lisa had notified the telco of her move, sending the notice to the old address was non-compliant.

The default was removed within five weeks. Lisa's Equifax score jumped over 150 points. Her home loan was approved the following month.

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What to Do Next

If you've paid a default and it's still on your credit file, don't just wait five years. Check whether the listing was done properly. The credit provider may have cut corners — and if they did, you have legal grounds to have it removed.

Request a free credit assessment from Australian Credit Solutions. We'll review your paid default against every legal requirement under the Privacy Act 1988 and the Credit Reporting Code. If there are grounds for removal, we'll explain exactly what the process involves.

You can also learn more about our dedicated paid default removal service, which is specifically designed for people in your situation.

Frequently Asked Questions

No, paying a default does not remove it from your credit file in Australia. When you pay a default, its status changes from 'unpaid' to 'paid' but the listing itself remains visible on your credit file for five years from the original date of listing. This is one of the most common misconceptions in Australian credit. However, if the default was listed in breach of the Privacy Act 1988 or Credit Reporting Code — for example, without proper notice — it may be removable regardless of whether it has been paid. Australian Credit Solutions has a 98% success rate removing defaults on accepted cases.

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Elisa Rothschild

(BA/LLB)

Principal Solicitor & Director

With over 12 years of experience in credit law, Elisa has helped thousands of Australians remove unfair credit listings and rebuild their financial futures. She leads Australian Credit Solutions' legal team with a focus on consumer advocacy and regulatory compliance.

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