What Is a Credit Default in Australia? (Plain-English Guide)

Quick Answer: A credit default in Australia is a listing on your credit file recording that you failed to repay a debt of $150 or more, and the creditor followed the required legal process to list it. Defaults stay on your file for 5 years from the listing date — regardless of whether you pay the debt. However, defaults listed in breach of the Privacy Act 1988 or Credit Reporting Code can be challenged and professionally removed, often within 30–90 days.

The word "default" sounds heavy — and on your credit file, it is. A single default can drop your credit score by 80–200 points, trigger automatic rejections from mainstream lenders, and follow you for five years. But there's something most people don't know: a large proportion of defaults in Australia were listed without following the correct legal process. Those can be removed.

This guide explains exactly what a credit default is, how it ends up on your file, what it means for your borrowing power, and what your legal options are.

The Legal Definition of a Credit Default

Under the Privacy Act 1988 and the Credit Reporting Code of Conduct, a default can be listed when all of the following apply:

• The overdue amount is $150 or more
• The debt has been overdue for at least 60 days
• The credit provider has sent a Section 21D notice — a formal written notice to your last known address advising that the debt will be listed on your credit file if not paid
• At least 30 days have passed since the Section 21D notice was sent without payment or resolution

These are not optional steps. Every one of them is a legal requirement. If a creditor skips any step — particularly the Section 21D notice — the listing is unlawful under the Privacy Act 1988 and can be challenged.

Who Can List a Default?

Any organisation that has provided you with credit can list a default. This includes banks, non-bank lenders, credit card providers, telcos (Telstra, Optus, Vodafone), energy providers (AGL, Origin, Energy Australia), internet providers, insurers, medical providers, and debt collection agencies acting on behalf of original creditors.

Debt collectors who purchase overdue debts are bound by the same rules as the original creditor — they cannot list a default without having sent the correct Section 21D notice from the original or collecting entity.

How a Default Affects Your Credit File and Score

A default stays on your credit file for exactly 5 years from the date it was listed — not from the date you missed the original payment. Paying the debt does not remove it or shorten the 5-year period. The listing simply changes from "default" to "paid default" — still visible, still damaging.

Real Case Study: Aisha, Perth — Default Listed With No Section 21D Notice

Aisha, 31, a marketing coordinator from Perth, noticed her mortgage pre-approval was declined by two banks in the same month. She pulled her Equifax credit report and found a $340 default from an energy retailer listed 18 months earlier — a debt she says she never received proper notice of.

During her ACS assessment, we requested the creditor's documentation trail. They could not produce evidence of a Section 21D notice being sent to Aisha's address at the time of listing. Under the Privacy Act 1988, without that notice, the listing was unlawful.

We challenged it. The energy retailer acknowledged they could not verify the notice was sent. The default was removed within 24 days of our challenge.

Result: Aisha's Equifax score moved from 494 to 697 after removal. She was approved for her home loan pre-approval the following month. Subject to individual assessment; results may vary.

The Most Common Grounds to Challenge a Default

Most people assume that if they owe the money, the default is legitimate. That's not how the law works. The listing process must follow strict rules — and when it doesn't, the listing can be removed regardless of whether the underlying debt exists.

The most common legal grounds for challenging a default under the Privacy Act 1988 include: no Section 21D pre-listing notice was sent, the debt was subject to an active dispute when listed, the listed amount is incorrect, the debt has been paid but the file shows otherwise, the debt is statute-barred (too old to be legally enforced), the listing is against the wrong person (identity error), and the debt has already been settled by formal arrangement but remains listed as a default.

Frequently Asked Questions

How long does a default stay on your credit file in Australia? Five years from the date the default was listed — not from the date of the original missed payment. Paying the debt does not shorten this period. The listing updates from "default" to "paid default" but remains visible for the full 5 years. Defaults listed unlawfully can be removed professionally before the 5-year period expires.

Does a credit default affect my ability to get a home loan? Significantly. Most mainstream banks have automatic decline policies for any active credit default, regardless of how small the amount is. Non-conforming and specialist lenders will consider applications with defaults but at rates typically 2–4% higher than mainstream rates — which on a $500,000 loan over 30 years can add over $200,000 in additional interest.

Can I get a default removed if I've already paid it? Paying a default changes its status to "paid default" on your file but does not remove it. To have it fully removed before the 5-year expiry, you need legal grounds under the Privacy Act 1988 — such as no Section 21D notice being issued, listing during an active dispute, or incorrect information. A free credit assessment determines viability within 24 hours.

What is the minimum amount that can be listed as a default? The minimum is $150. Debts under $150 cannot be legally listed as a default on your credit file under Australian law, regardless of how overdue they are.

Do utility companies list defaults on credit files in Australia? Yes. Energy providers, telcos, and internet service providers are all credit reporting bodies under Australian law and can list defaults on your credit file following the same process as banks and lenders. Utility defaults are among the most commonly challenged — because many utility providers have poor record-keeping around their Section 21D notice obligations.

Can a debt collector list a default on my credit file? Yes — if they are a licensed credit provider or debt collector and they follow the correct process. However, debt collectors must also have sent the appropriate pre-listing notice. Many debt collection defaults are challenged successfully on the basis that the notice process wasn't properly followed during the handover from the original creditor.

Find Out If Your Default Can Be Challenged

Many defaults on Australian credit files were listed without full compliance with the Privacy Act 1988. A free assessment from ACS takes 24 hours and tells you clearly whether yours can be removed — and what the realistic timeline and outcome looks like.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has achieved a 98% success rate on accepted cases since 2014. No Win No Fee.

Get My Free Assessment → 📞 0489 265 737 🛡️ ASIC Licensed ACL 532003 | ⭐ 4.9/5 from 976+ Reviews | 🏆 Award Winner 2022–2024

Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice. External resources: Privacy Act 1988 — OAIC | Credit Reporting Code — OAIC | MoneySmart Credit Scores

Related reading: How to Remove a Default → | How Long Does a Default Last? → | Default Removal Services →