Paid Default vs Unpaid Default
Here's a myth worth busting straight away, because it costs people money: paying a default does not remove it from your credit file. It changes the status, not the listing. Here's how paid and unpaid defaults compare, how lenders read each, and what actually gets a default removed.
Paid vs Unpaid Default at a Glance
| Paid default | Unpaid default | |
|---|---|---|
| Status shown | Marked ‘paid’ | Shows as outstanding |
| Stays on file | 5 years from the date listed | 5 years from the date listed |
| How lenders read it | Resolved, but still a negative marker | Active concern — debt still owing |
| Effect on applications | Generally viewed more favourably than unpaid | Tends to weigh more heavily against you |
| Can it be removed? | Only if listed incorrectly | Only if listed incorrectly |
The biggest myth, because it costs people money: paying a default does not remove it from your credit file. It changes the status, not the fact that it's there. Both paid and unpaid defaults sit on your file for the same five years. What changes is how a lender reads it.
Does Paying Remove It?
Does paying a default remove it from your credit file?
No. In Australia, a default stays on your credit file for 5 years from the date it was listed, whether you pay it or not. Paying it updates the status to ‘paid’, which lenders generally view more favourably, but the listing itself remains for the full five years under the Privacy Act 1988.
This catches a lot of people out — they pay the debt expecting a clean file, and the listing is still there. Paying is still usually worthwhile, just for different reasons.
Paid vs unpaid — which looks better to a lender?
A paid default generally looks better to a lender than an unpaid one, because it shows the debt has been resolved. Both remain on your credit file for 5 years and both are negative markers, but an outstanding (unpaid) default signals an active, unresolved debt and tends to weigh more heavily against an application.
Source: OAIC — credit reporting
If you can clear an unpaid default, doing so at least removes the ‘still owing’ signal — even though the listing stays.
When a Default Can Be Removed Early
Can a paid or unpaid default be removed early?
Either a paid or an unpaid default can be removed before its 5-year term only where it was listed incorrectly or in breach of the credit reporting rules — for example, where the required section 21D notice was never issued, the amount is wrong, or the debt was genuinely in dispute. Paying alone is not a ground for removal. Whether grounds exist depends on the individual file.
So the real question isn't ‘paid or unpaid’ — it's ‘was this listed correctly in the first place’. That's what determines whether it can be challenged. See our guide to default removal services.
Bottom Line
Paid and unpaid defaults both stay on your Australian credit file for 5 years — paying changes the status to ‘paid’ but doesn't remove the listing. A paid default reads better to lenders, but neither comes off early just for being paid. Removal is only possible where the listing breached the Privacy Act 1988.
Related Comparisons & Guides
Sources & methodology
- OAIC — credit reporting — oaic.gov.au
- ASIC Moneysmart — credit repair — moneysmart.gov.au
- Privacy Act 1988 (Cth) — legislation.gov.au
Paid vs Unpaid Default Questions
Does paying a default remove it from your credit file?
Is a paid default better than an unpaid one?
Can a paid or unpaid default be removed early?
Paid the Debt but the Default Won't Budge?
A free, no-obligation assessment shows you what is listed on your file and whether the default may have been listed in breach of the Privacy Act 1988. No Win No Fee — you only pay if we succeed.
Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit file correction services are subject to individual assessment and results may vary. This page provides general information only and does not constitute legal or financial advice. Figures are drawn from third-party sources current at the date of publication and may change — always check the original source for the latest data.
Last updated: 14 June 2026 · Reviewed by Elisa Rothschild BA/LLB · ASIC ACL 532003