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what-is-credit-default-and-how-does-it-affect-the credit-score

What Is a Credit Default & How Does It Affect My Credit Score?

Credit Repair / By
Loans are an essential part of many Australians’ financial journey. Whether you’re a first-home buyer or upgrading to a home with more space, most of us will need to take out a mortgage to move up the property ladder. Beyond home loans, many people will also take out car loans when they’re ready for a new set of wheels. It’s not uncommon for people to take out personal loans for big purchases, like home improvements or weddings. In fact, even credit cards are also considered a type of loan.

But what happens when you can’t get approved for a loan? Credit Repair Solicitors are the experts in credit repair in Australia, helping people improve their credit scores every day. In this blog, we’ll explore what a credit default is, how that default can impact your credit score, and how Credit Repair Solicitors can help.

What Is a Credit Score?

In Australia, your credit score is a numerical representation of your creditworthiness, ranging from 0 to 1,200*. This score is calculated based on the information in your credit report, which includes your credit history, payment behaviours, and the types of credit you’ve used. Your credit history could feature positive entries like a home loan paid on time or negative entries like late utility bill payments.
A high credit score indicates that you are a low-risk borrower, making it easier to obtain loans and credit on favourable terms. Conversely, a low credit score suggests higher risk, potentially leading to declined credit applications or higher interest rates.

*Some credit reporting bodies will measure out of 1,000.

What Is a Credit Default?

A credit default occurs when you fail to make a payment on a debt for 60 days or more. When this happens, the lender may report the missed payment to a credit reporting body, and the default is then listed on your credit report. The overdue payment must be equal to or more than $150 before it can be listed on your report. A credit default is a serious negative mark on your credit history, signalling to potential lenders that you have previously struggled to manage your financial obligations.

How Credit Defaults Affect Your Credit Score

A credit default can significantly lower your credit score. The presence of a default indicates that you’ve missed payments for an extended period, which can further suggest financial instability. Even a single default can lead to a substantial drop in your credit score, making it difficult to secure new credit or loans. Additionally, credit defaults can stay on your credit report for up to five years, continuing to affect your creditworthiness during that time.

When your credit score is lowered due to a default, you may face higher interest rates, stricter lending conditions, or even outright rejection from lenders when you apply for credit. This can make managing your finances more challenging and expensive.

How Credit Repair Solicitors Can Help

If you’re dealing with a credit default, engaging an agency like Credit Repair Solicitors can be valuable for improving your credit score. We specialise in credit default removal in Australia, working to have incorrect or unfair defaults removed from your credit report.

Here’s how we do it:
  • Comprehensive Credit Report Review: We begin by thoroughly reviewing your credit report to identify any defaults or negative listings that may be inaccurate, outdated, or unfairly listed.
  • Dispute Process: If we find any incorrect listings, we initiate a dispute with the credit reporting body or creditor. We provide the necessary documentation and arguments to have the default removed.
  • Negotiation with Creditors: In some cases, we may negotiate directly with creditors to remove or amend the default — particularly if you’ve already paid off the debt or the default was listed under extenuating circumstances. We may also be able to negotiate a smaller debt repayment or more favourable payment terms.
  • Ongoing Support: We offer ongoing support and advice to help you maintain a healthy credit score and ensure that your credit report accurately reflects your financial behaviour.

Unlock Your Financial Freedom Today

Removing a credit default can significantly improve your credit score, making it easier to obtain credit on better terms. Our expert team is here to help you restore your financial reputation and regain control of your credit health.

If you’re struggling with a credit default, contact us today to learn how Credit Repair Solicitors can assist with credit default removal and help you achieve a stronger, healthier credit score.