Defaults and Your Credit Score: How Much Damage Does One Listing Do?

Getting a default on your credit file hits your credit score immediately and continues damaging it for years.

A single default can drop your credit score by 50 to 200 points, depending on your starting position and the rest of your credit history. The exact impact varies between credit reporting bodies, but all three major agencies in Australia treat defaults as serious negative events.

But here’s what many people don’t realise: some defaults are listed incorrectly, without the proper process being followed, or contain errors that may make them open to dispute.

Got a default on your credit file? Lodge it with Default Gone right here, or call us on (02) 5502 7025. $399 flat per consumer per default. We do not guarantee removal — outcomes depend on the facts of each case — but we will prepare and lodge the dispute properly.

Short answer: How much does one default damage your credit score?

A default typically reduces your credit score by:

• 50-100 points if you have other positive credit history
• 100-200 points if you have limited credit history or other negative events
• Up to 200+ points if it’s your first major negative listing

The damage is immediate and lasts until the default is removed from your file, which can be up to five years from the date it was listed.

How credit scores work in Australia

Australia uses a comprehensive credit reporting system where your score reflects your entire credit history, not just defaults. The three major credit reporting bodies each use slightly different scoring models:

Equifax scoring (0-1,200 scale)

• Excellent: 833-1,200
• Very Good: 726-832
• Good: 622-725
• Average: 510-621
• Below Average: 0-509

Experian scoring (0-1,000 scale)

• Excellent: 800-1,000
• Very Good: 700-799
• Good: 625-699
• Fair: 550-624
• Poor: 0-549

Illion scoring (0-1,000 scale)

• Excellent: 800-1,000
• Great: 700-799
• Good: 500-699
• Room for improvement: 300-499
• Low: 0-299

A default affects your score across all three agencies, though the exact point reduction may vary slightly between them.

Why defaults cause such significant damage

Defaults represent a serious breach of your credit obligations. From a lender’s perspective, a default indicates:

Payment failure over time

A default isn’t listed after missing one payment. Credit providers must follow a specific process including multiple notices and at least 60 days before listing a default for amounts over $150.

Substantial debt amount

Defaults can only be listed for debts of $150 or more. Most defaults involve significantly higher amounts, representing substantial unpaid obligations.

Persistent non-payment

The listing process means you had multiple opportunities to resolve the debt before it reached default status, suggesting ongoing payment difficulties.

Future risk indicator

Lenders view defaults as strong predictors of future payment problems, making you a higher-risk borrower.

Factors that influence default impact on your score

The exact credit score damage from a default depends on several factors:

Your starting credit score

If you have an excellent credit score (800+), a default causes maximum damage because you’re falling from the highest tier. Someone with an already-poor credit score may see less absolute point reduction.

Existing credit history

A default hits harder if you have:

• Limited credit history
• No positive credit events (loans paid on time)
• Other negative listings already on your file

Default details

Larger default amounts may have slightly more impact, though the difference is often minimal once you’re above the $150 threshold.

Time since listing

While the default stays on your file for five years, its impact on your score may gradually reduce over time, especially if you rebuild positive credit history.

How long does default damage last?

Defaults remain on your credit file for five years from the date they were listed, not from when the debt was incurred or resolved. During this entire period:

Immediate and ongoing impact

• Your score drops immediately when the default is listed
• The negative impact continues for the full five-year period
• The damage may only slightly decrease over time

No automatic recovery

Unlike some credit events that become less damaging over time, defaults maintain significant negative impact throughout their five-year listing period.

Compound effect with other events

If you incur additional defaults or other negative credit events, the combined damage can be severe and long-lasting.

Real-world consequences of default damage

The credit score reduction from a default creates practical problems across multiple areas:

Home loan applications

• Many lenders automatically decline applications with recent defaults
• Those that don’t decline may require larger deposits or charge higher interest rates
• Non-conforming lenders may be your only option, with significantly higher costs

Rental applications

• Real estate agents routinely check credit files
• Defaults can lead to rental application rejections
• You may need additional guarantors or higher bonds

Personal and car loans

• Interest rates increase substantially with defaults on file
• Loan amounts may be reduced
• Some lenders specialise in “bad credit” lending at premium rates

Business finance

• Business loan applications often include personal credit checks for directors
• Defaults can block business growth opportunities
• Equipment finance and trade credit may be affected

Insurance and utilities

• Some insurers check credit files and may charge higher premiums
• Utility connections may require bonds if defaults are present
• Phone and internet plans may be restricted

What to check if you have a default affecting your score

Not every default on your credit file was necessarily listed correctly. Here’s what to check:

Listing process compliance

• Was the default amount $150 or more?
• Did the credit provider send proper default notices to your correct address?
• Was there at least 30 days between the notice and listing?
• For amounts over $150, was there at least 60 days?

Debt validity and assignment

• Is the amount listed accurate?
• If listed by a debt collector, was the debt properly assigned to them?
• Were all legal requirements for debt collector listings followed?

Payment and resolution status

• If you paid the debt, is this reflected correctly?
• Was the default listed after payment was received?
• Are payment arrangements properly recorded?

Personal details accuracy

• Are your name, address, and other details correct?
• Could this be a case of mistaken identity?
• Are dates accurate?

Statute of limitations

• Is the debt beyond the statute of limitations period for your state?
• Were proper legal steps taken if the debt was statute-barred?

Can paying a default improve your credit score?

Paying a default doesn’t remove it from your credit file or restore your credit score to its previous level. However:

Paid status recording

Once paid, the default should be marked as “satisfied” or “paid”, which is better than an outstanding default when lenders review your file.

No score improvement

The negative impact on your credit score remains the same whether the default is paid or unpaid. The five-year listing period continues from the original listing date.

Lender perception

While your score doesn’t improve, some lenders view paid defaults more favourably than unpaid ones when making lending decisions.

Avoiding additional problems

Paying the default stops potential debt collection activities, legal action, and prevents the debt from growing with additional interest and fees.

When challenging a default might help your score

If a default was listed incorrectly, successfully challenging it can restore your credit score. However, outcomes depend on the specific facts and the credit provider’s response.

Grounds for challenging

Defaults may be worth disputing if:

• The listing process wasn’t followed correctly
• The debt amount is wrong
• Payment was made before the default was listed
• The debt was assigned incorrectly to a debt collector
• Required notices weren’t sent to your correct address
• The default was listed beyond time limits

Score recovery potential

If a default is successfully removed, your credit score should recover to approximately where it would have been without the listing. However, this isn’t sought and depends on the rest of your credit history.

Professional dispute process

Challenging defaults requires understanding credit reporting law, proper documentation, and following specific dispute procedures with credit providers and credit reporting bodies.

Building your score back up with a default on file

While a default severely damages your credit score, you can still work to improve it:

Maintain current obligations

• Pay all bills and loan repayments on time
• Keep credit card balances low
• Don’t miss any payments while the default is on your file

Avoid additional negative events

• Don’t incur additional defaults
• Avoid court judgements
• Be careful with credit applications that might be declined

Time and patience

Credit score recovery with a default takes years, not months. Focus on building positive credit history that will help when the default eventually falls off your file.

Consider specialist lenders

If you need credit while a default is on your file, research lenders who specialise in non-conforming lending rather than repeatedly applying with mainstream lenders who will likely decline.

How Default Gone helps

Default Gone helps Australians challenge unfair, incorrect or unlawfully listed defaults. We collect the relevant information, prepare the dispute, lodge it with the credit provider and/or credit reporting body, track the response and explain the outcome in plain English.

The standard Default Gone service is $399 per consumer, per default. There are no stage fees, no success fees and no surprise invoices. The fee covers the work performed, not a sought outcome.

Get a free credit scan to check your current credit file status, review how our dispute process works, or check our flat-fee pricing structure.

Next steps

If a default is holding down your credit score and affecting loan approvals, rental applications or business plans, don’t just accept it without checking whether it was listed correctly. Many defaults contain errors or weren’t listed following the proper process.

Disclaimer

Default Gone is not a law firm and does not provide legal or financial advice. We do not undertaking that a default or judgement will be removed. Outcomes depend on the facts, documents and response from the credit provider, credit reporting body or relevant legal pathway.

Frequently asked questions

How much does one default drop your credit score?

A single default typically reduces your credit score by 50-200 points, depending on your starting score and credit history. The impact is immediate and continues for up to five years.

Does paying a default improve your credit score?

No, paying a default doesn’t improve your credit score. The negative impact remains the same whether paid or unpaid. However, a paid status is viewed more favourably by lenders than an outstanding default.

How long does a default stay on your credit file?

Defaults remain on your credit file for five years from the date they were listed, regardless of whether you pay them or not. The negative impact on your score continues for this entire period.

Can you get a home loan with a default on your credit file?

Getting a home loan with a default is difficult but possible. Many mainstream lenders will decline applications with recent defaults. You may need to use specialist lenders who charge higher interest rates and require larger deposits.

What’s the minimum amount for a default to be listed?

Credit providers can only list defaults for debts of $150 or more. There’s also a specific process including notices and waiting periods that must be followed before listing.

Can a default be removed before five years?

Defaults can only be removed early if they were listed incorrectly or the proper process wasn’t followed. Successfully challenging an incorrect default can restore your credit score, but outcomes depend on the specific circumstances.

Do all three credit reporting bodies show the same default?

Yes, if a default is listed, it appears on your credit file with Equifax, Experian, and Illion. However, the exact impact on your score may vary slightly between agencies due to different scoring models.

What happens to your credit score when a default falls off after five years?

When a default is removed after five years, your credit score should improve significantly. The exact increase depends on the rest of your credit history and any positive credit behaviour you’ve built up during those five years.