Your credit score is one of the most important numbers in your life, especially in Australia. It affects your ability to get loans, credit cards, a new car, and your dream house.
If you’ve ever missed payments or fallen behind on bills, you might have a default on your credit file which can impact your credit score.
It’s more common than people think, but a lot of Aussies still don’t really know anything about it or how to address it.
What Is a Credit Default? How Do Defaults Affect Credit Scores?
A credit default happens when you miss the agreed repayment terms on a loan or credit account.
In Australia, if you owe at least $150 and it stays unpaid for more than 60 days, the lender may report it as a default to credit reporting agencies like Equifax, Experian, or illion.
Once a default appears on your file, your credit score takes a hit and getting approved for new loans and credit cards becomes much harder.
Defaults stay visible on your credit report, serving as a red flag or warning sign to future lenders. It tells them that you’ve struggled to keep up with payments in the past. This is why a bad credit report or a terrible credit score can have long-term consequences.
Even ‘small’ defaults, like overdue phone bills or utility payments, can end up on your record and harm your overall rating.
One default doesn’t necessarily make you a bad borrower, but it does signal risk to lenders. They may then offer lower credit limits, higher interest rates, or reject your loan applications.
How Long Do Defaults Stay On Your Credit File in Australia?
If you’re wondering how long defaults stay on your credit file, the answer is usually five to seven years from the date it was added. During this time, they continue to impact your credit score even if you eventually pay off the debt. That’s half a decade of living with a bad credit score.
After the five to seven years is up, the default will be removed from your credit file. It’s the same with your positive and worst repayment history; they can stay for up to five years.
Why People End Up With Terrible Credit
There is really no shame in having a bad credit score as it happens more often than people realise. Life doesn’t always go as planned. You might lose your job, face medical bills or emergencies, or deal with sudden expenses that throw your budget off.
Sometimes it’s as simple as missing a few payments or not keeping track of due dates. Before you know it, those small setbacks can turn into defaults and leave you with a poor credit report.
While it can feel discouraging, it’s important to remember that these situations are common, and many people recover from them with the right approach and support.
The important thing is to recognise what caused it. Understanding how you got there helps you avoid repeating the same mistakes when rebuilding your credit.
Can Your Credit Score Reset After a Default?
Many people hope that a credit score will reset automatically after a default, but unfortunately, it doesn’t work that way. It doesn’t just reset overnight.
While (valid) negative entries remain on your credit report for up to five years, your score can improve gradually over time if you take steps to demonstrate responsible financial behavior. The key here is consistency.
Making timely payments on all current accounts, reducing outstanding debt, and avoiding new defaults can slowly rebuild your credit rating. You can think of credit repair and credit restoration as a long-term process rather than a quick fix.
While your credit report won’t reset itself, positive actions can help your credit score recover steadily.
Steps To Repair And Restore Your Credit Score In Australia
Repairing your credit after a default takes time, but it is entirely possible.
The first step is to address any outstanding debts. Paying off overdue accounts and negotiating with creditors can prevent further damage. If the default is incorrect or inaccurate, you can send a request to the relevant credit reporting agency.
Professional credit repair services, like Australian Credit Savers, can provide help on how to efficiently and legally improve your credit file. These services can help you identify errors on your report, create a repayment plan, and do the talking for you.
Some case studies show that individuals were able to have invalid listings and see improvements in their credit within just one to two months.
However, not all credit repair companies are alike. Do not trust those that claim to boost your score overnight. If it sounds too good to be true, it usually is. And you may end up with a worse score than before.
The most important thing is to be patient and consistent. Even small, positive steps will reflect on your score over time.
How to Prevent Future Defaults and Maintain a Good Credit Rating
Once your score starts improving, protecting it becomes the next goal.
The best way to avoid another default on your credit report is through organization. Set reminders, automate payments, and make a habit of checking your credit file every few months.
Budgeting also helps more than most people realise. Prioritising essential bills and cutting back on unnecessary spending keeps you from falling behind.
Over time, these small habits create stability and lenders notice that. Maintaining good credit habits helps you avoid ending up with terrible credit again and builds trust with financial institutions.
Defaults can feel like a huge setback, but they’re not the end of your financial story.
They stay on your credit report for around five to seven years, but you can start improving your credit score right away with consistent efforts and smart habits.