What exactly is a credit default?
Defaults are often misunderstood. Here is what one really is and when it can be listed.
This guide helps you
- Define what a credit default is
- Understand the conditions before one can be listed
- Distinguish a default from a missed payment
- Know how a default affects you
- Find free help if you are facing one
5 min
What's happening
A credit default is a listing on your credit report showing that you owed money and did not pay it as required. It is more serious than a single late payment. In Australia, a payment default can generally only be listed when specific conditions are met, so not every overdue bill becomes a default.
When one can be listed
Generally, before a payment default can be recorded:
- The overdue amount must be above a set threshold.
- The payment must be overdue by a defined period.
- The provider must have given you the required notices, including a notice that a default may be listed.
The exact figures and timeframes are set by the rules and can change, so confirm the current position.
How it affects you
A default stays listed for a set period, generally around five years, and can make borrowing harder while it is there. It does not cancel the underlying debt, which you may still need to deal with. Paying it generally updates the listing to 'paid' rather than removing it.
Watch out for
Do not assume any overdue bill is a default, and do not assume a default is automatically valid. Check that the threshold, the overdue period and the notice requirements were all met. If they were not, the listing may be incorrect and can be challenged for free.
Where to get free help
For the meaning of related terms, see the glossary. If you are facing a default, a free financial counsellor on the National Debt Helpline (1800 007 007) can help you understand and respond to it.
Key takeaways
- A default is more serious than a single missed payment.
- Strict conditions must be met before one can be listed.
- It generally stays around five years and does not cancel the debt.
- An improperly listed default can be challenged for free.
Frequently asked questions
Is a missed payment the same as a default?
No. A default requires the amount to be over a threshold, overdue by a set period, and the required notices to have been given. A single late payment is recorded differently.
Does a default cancel my debt?
No. The debt may still be owed. The default is a record of non-payment, not a wiping of the amount.
Can a default be listed without warning?
Generally not. The provider must give you the required notices first, including that a default may be listed. Confirm the current rules.
This is general information, not legal or financial advice. Your situation is unique and rules can vary by state and over time — for advice on your circumstances, speak to a free financial counsellor (National Debt Helpline 1800 007 007) or get legal help.
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