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Refinancing when there is a default on file

A default narrows the lender list. It does not end the conversation. Here is what a default actually is, how long it lasts, and what an assessor is really asking when they see one.

Myla Alamis

Credit Specialist and Parabroker

· 8 min read

A loan file open on a working desk, at the point where a default gets explained rather than assumed

What a default actually is

A default is a specific entry on your credit file, not a general note that you were late. A credit provider can only list one when a set of conditions has been met, and every one of those conditions matters.

  • The overdue amount meets the minimum set under the Privacy Act. It is a modest figure and it can change, so confirm the current amount with the credit reporting body before assuming a balance was too small to list.
  • The payment is at least sixty days overdue.
  • The provider has sent written notice asking for payment, and then a separate later notice warning that the default may be disclosed to a credit reporting body.
  • Time has passed after that second notice without the account being brought back into order.

If a step was skipped, the listing is arguable. That is worth knowing before you accept it as settled fact.

The sequence that has to run before a default can be listed

A default is the end of a sequence, not a reaction to one missed payment. Every step before the listing is a chance to stop it, and the only clock that matters afterwards starts on the listing date rather than on the day the debt was incurred.

Describes the conditions set under the Privacy Act. Confirm current requirements and the minimum amount with the credit reporting body.

View as a table
WhenWhat happens
The payment is missedOn its own this is repayment history information: a monthly grade against that account, held for two years. It is not a default and it is not close to one yet.
Sixty days overdue, at the earliestThe amount also has to meet the statutory minimum. A small balance can sit well past sixty days without ever being listable.
The first written noticeThe provider has to ask for payment in writing. This is the point at which most listings can still be stopped, and it is the letter people most often leave unopened.
The second written noticeA separate, later notice warning that the default may be disclosed to a credit reporting body.
The listingTime passes after that second notice with the account still out of order, and the default is listed.
Five years from that dateThe entry falls away. Paying it updates the status to paid. It does not move this date.

How long it stays, and what paying it changes

Retention periods are set by law, not by the lender who listed the entry. Knowing them turns a vague worry into a date on a calendar.

Retention on an Australian consumer credit file. Confirm current periods with the credit reporting body.
EntryHow long it is heldWhat paying it changes
DefaultFive years from the date it was listedStatus becomes paid. The entry stays.
Serious credit infringementSeven yearsStatus can be updated. The entry stays.
Repayment historyTwo years, rolling monthlyNothing retrospectively. Future months improve.
Financial hardship informationTwelve monthsFalls away on time, not on payment.
Credit enquiryFive yearsNothing. An enquiry records that you asked.
Court judgmentFive yearsStatus can show as settled. The entry stays.
BankruptcyFive years from the date of bankruptcy, or two years from discharge, whichever is laterNothing. The National Personal Insolvency Index record is permanent.
A long horizontal timeline, standing in for retention periods that run in years rather than months
The clock starts on the date an entry was listed, not the date the debt was incurred and not the date it was paid. That is why the listing date is the first thing worth checking on your own file.

Paying a default does not delete it, and nobody can lawfully delete an accurate one. What payment changes is the answer to the first question a credit assessor asks, which is whether the debt is still outstanding. An unpaid default sitting beside a fresh application reads as an unresolved problem. A paid one reads as a closed chapter.

A serious credit infringement, sometimes called a clearout, is listed when a provider believes you deliberately evaded the debt. It runs longer and it reads far heavier. If one appears and you never received contact from the creditor, that is a listing to challenge rather than absorb.

What a credit assessor is really asking

An assessor is not scoring the word default. They are reading six things at once, and most of them are about context rather than the dollar figure.

  • Who the creditor was. A telco or utility default reads differently to a default on a credit contract, because utilities cannot report repayment history at all and often list quickly.
  • How old it is. A default from four years ago with clean conduct since is a different file to one from four months ago.
  • How large it is, and whether the size is consistent with an oversight or with genuine stress.
  • Whether it is paid, and when it was paid.
  • Whether it is one entry or a pattern. A single default with an explanation is a story. Six defaults across two years is a trend.
  • What your conduct looks like since. Repayment history on current accounts is the strongest counterweight available to you.
Ruled columns of a ledger, standing in for the line-by-line way an assessor works through a credit file
Nothing on a credit file is weighted on its own. An assessor reads the entries against each other, which is why a single line rarely decides an application by itself.

Age and conduct beat size

Files with a large paid default from three years back get through where a small unpaid one from last quarter does not. Recency and resolution move an assessment harder than the amount does. That is also the part you can still influence between now and an application.

Reads as a closed chapter

  • Listed several years ago, with the listing date plain on the file.
  • Status shown as paid, with the creditor’s written confirmation on hand.
  • One entry, from one period, with a short written explanation attached.
  • Clean repayment history on every current commitment since.
  • No cluster of recent enquiries sitting behind the application.

Reads as an open problem

  • Listed in the last few months, still at the top of the file.
  • Status still unpaid, with no arrangement in place.
  • Several entries across a run of years, from different creditors.
  • Arrears grades still appearing against current accounts.
  • Four enquiries in six weeks with no new account opened behind them.

The lender tiers, honestly

Australian lenders sit on a spectrum, and a default moves your file along it. The trade is consistent even though the products change constantly.

General appetite by lender tier. Individual policy varies and changes.
TierTypical position on defaultsWhat it costs
Major banks and prime lendersGenerally none, or very small paid entries under tight conditionsSharpest pricing, tightest policy
Non-bank primeSome appetite for small, aged, paid defaultsNear-prime pricing, more policy flex
Near-prime specialistsPaid defaults, and some unpaid ones with an explanationA pricing loading and often a lower maximum loan-to-value ratio
Non-conforming specialistsMultiple defaults, judgments, discharged bankruptcyHigher cost, risk fees, tighter ratios
Private lendersCase by case, security-led rather than credit-ledShort term, highest cost, an exit plan required from day one

There are no rate figures in that table on purpose. Pricing moves constantly and none of it would be a quote. What stays stable is the shape of the trade: as policy loosens, price and ratio tighten.

What to do before you apply

Credit files to order
All three
Cost of your own report
Free
Clean months worth building
Six
How long an enquiry shows
Five years
  1. 01

    Get all three files

    Equifax, Experian and illion hold separate files, and a default can sit on one and not the others. You are entitled to a free copy from each on a regular cycle. Order all three.

  2. 02

    Check every entry line by line

    Listing date, amount, creditor name, and whether the account was one you actually held. Errors are more common than people expect, particularly after a business changes hands or a name is misspelt.

  3. 03

    Resolve what you can

    Where a default is genuine and payable, pay it and get written confirmation. Ask the creditor to update the status with the credit reporting body, then check that it has actually been updated.

  4. 04

    Write the explanation before you are asked

    One page. What happened, when, what changed, and what has been true since. Illness, separation, a debtor collapse or a business closure are all things assessors have read before.

  5. 05

    Keep six months clean

    Every current commitment paid on time. Repayment history is graded monthly, so six clean months is a visible, verifiable answer to the question a default raises.

  6. 06

    Stop applying while you sort it out

    Every application leaves an enquiry for five years, and an enquiry does not record the outcome. A cluster reads as declined applications whether or not that is what happened.

When the listing should not be there

You have a right to have credit information corrected when it is wrong, and the process costs nothing.

  1. 01Ask the credit reporting body or the credit provider to correct it, in writing, with whatever evidence you hold. You can approach either.
  2. 02They generally have thirty days to respond, and they must tell you the outcome and the reasons for it.
  3. 03If the answer is no and you still disagree, the free external dispute resolution scheme the provider belongs to can review it.

None of that needs a paid credit repair firm. A firm cannot remove an accurate listing, because nobody can. What they charge for is a letter you are entitled to send yourself.

Where refinancing still makes sense

A default is a credit signal. It is not a valuation and it is not your income. Where there is equity in a property and the income supports the new debt, a refinance can still be the right move with a listing on file, particularly when it replaces several expensive unsecured balances with one secured repayment.

  • The debt being consolidated is unsecured and costly to carry.
  • There is genuine equity, confirmed by a lender-ordered valuation rather than an online estimate.
  • Income supports the new repayment under the lender’s assessment buffer, not only at the headline repayment.
  • There is a written plan to review again once the file has aged.

The other half has to be said just as plainly. Consolidating unsecured debt into a mortgage moves it behind your home and stretches it over a longer term. The repayment falls, and unless you keep paying at the old combined amount the total interest can rise. Sometimes that trade is worth it and sometimes it is not, and it should be worked out on your numbers before anything is signed.

What consolidation does to the monthly figure, and what it does not do

The monthly amount falls because the term stretches, not because the balance shrank. Keep paying the old $2,160 and the difference goes to principal. Settle for $1,240 and the same debt costs more over its life. That is the trade, stated in one picture.

Illustrative projection only. Figures are rounded examples and no interest rate is stated or implied. Not a quote and not an offer of credit.

View as a table
Amount
Credit card$540
Personal loan$720
Second personal loan$560
Buy-now-pay-later$340
Four unsecured repayments$2,160
One secured repayment$1,240

WeL’nd is a credit representative, a member of the FBAA, with external dispute resolution through AFCA. We do not remove defaults, because no one can. What we do is read the whole file, match it to a lender whose policy fits it, and say early if the answer is no. Nothing on this page is credit advice or an offer of credit, and every application is subject to lender assessment.

FAQ

Questions people actually ask

If yours is not here, ask it. We would rather answer the awkward one early than have you find out later.

1300 015 267
Can a paid default be removed from my credit file?
Not if it was correctly listed. Paying updates the status to paid, which genuinely matters to an assessor, but the entry stays for its full retention period. Anyone offering to remove an accurate default is selling something they cannot deliver.
How soon after a default can I refinance?
There is no fixed waiting period. Some specialist lenders will consider an application while a default is recent, at a cost in pricing and in the maximum ratio. Appetite broadens as the listing ages and as clean repayment history builds behind it. The practical answer comes from your file rather than from a rule.
Will checking my own credit file lower my score?
No. Requesting your own report is not a credit enquiry and lenders do not see it. Only applications for credit leave enquiries.
Does a telco default count as much as a loan default?
It is read differently, but it still counts. Telcos and utilities cannot report repayment history, so a default is the only signal they ever leave. Assessors know that a modest telco listing often traces back to a disputed final bill rather than credit stress, which is exactly why a short written explanation is worth preparing in advance.
Can I get a home loan with an unpaid default?
It is possible with some specialist lenders, and it is harder. Most policies that accept defaults prefer them paid, and many require the default to be paid out at settlement from the loan itself. Expect a lower maximum ratio and a pricing loading. No lender guarantees approval, and neither do we.
Should I use a credit repair company?
There is nothing a credit repair company can do that you cannot do yourself at no cost, and they cannot remove an accurate listing. If a listing is wrong, write to the provider or the credit reporting body, then use the free dispute scheme if you are not satisfied with the response.

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