Quick answer
A paid default stays on your Australian credit file for five years from the date it was first listed, not from when you paid it, but it's updated to show it was paid. Many non-bank and secured lenders treat a paid default as resolved, especially if it's more than a year old and recent repayments are clean. Banks may also consider it once it's older and well explained.
Key points
- Paying a default updates the listing to paid; it doesn't delete it or restart the clock
- The five years run from the original listing date, so you can work out exactly when it disappears
- Time since payment and a run of on-time repayments matter more to lenders than the listing itself
- A payout letter from the creditor is the single most useful document you can bring
You did the right thing. The debt is paid, the creditor confirmed it, and yet the listing is still sitting on your credit report, and a lender has just asked about it. That’s normal, and it’s not the setback it feels like. A paid default is one of the easier credit marks to borrow around, provided you can show when it happened, when it was cleared, and what your record looks like since.
Why is the default still there after I paid it?
Australia’s credit reporting rules keep a default on file for five years, and paying it doesn’t shorten that. What changes is its status: the creditor must update the listing to show the amount has been paid. The five years are counted from when the default was first listed, so paying late in the period doesn’t push the drop-off date back, and paying early doesn’t bring it forward.
That has a useful side effect: the date your default disappears is fixed and knowable. Find the listing date on your reports from Equifax and Experian (they may differ slightly if the creditor reported to both at different times), add five years, and you have the date your file changes.
The only listings that can come off early are ones that were wrong in the first place, for example where the required notices weren’t sent, the amount was under $150, or it’s not your debt. Correctly listed paid defaults run their full term. Our default glossary entry explains the terms lenders use.
How lenders read a paid default over time
Lender policies differ, but the general pattern looks like this. Treat it as a guide to where the doors usually are, not a promise.
| Since the default was paid | How it tends to be read | Lenders worth approaching |
|---|---|---|
| Under 6 months | Resolved but recent. The lender wants to see the problem has stayed fixed | Non-bank lenders with strong bank statements; property-secured lenders |
| 6 to 24 months | Increasingly seen as history, especially with on-time repayments since | Most non-bank and unsecured lenders; some banks for small, explained defaults |
| Over 2 years | Older, settled, and outweighed by recent conduct | A wider range, often including your bank if the rest of the file is clean |
| Past the 5-year mark | Gone from the file | Normal lending criteria apply |
Why does the two-year mark matter? Under comprehensive credit reporting, lenders can see up to two years of monthly repayment history on consumer accounts such as home loans and car loans. After 24 straight months of on-time payments, everything in that window postdates the trouble. Our comprehensive credit reporting entry explains what that history shows.
The evidence that turns a maybe into a yes
A paid default with documents is a much easier conversation than a paid default without them. Gather:
- The creditor’s payout or settlement letter confirming the amount paid, the date and that nothing more is owed.
- Updated credit reports showing the listing marked as paid. If it still shows unpaid, ask the creditor to update it before you apply.
- A short explanation of what caused it. A disputed bill, a separation, an illness or a business customer who didn’t pay are all common and understood.
- Recent business bank statements, ideally covering six months or more, free of dishonours and long overdrawn stretches.
- The most recent BAS and lodged returns. If lodgements are behind, a letter from your accountant fills the gap.
Keep the explanation to a few sentences of facts. The aim is to show the cause has passed and you know why it happened; a long defence works against you.
Ready to see which lenders will look at your file now that it’s paid? Start a short enquiry. Asking costs nothing, and your file stays untouched.
Choosing the right kind of loan
Once a default is paid, the amount you need and the security on offer steer the choice of loan more than the listing does.
- Smaller working capital, no property: unsecured business loans are assessed on turnover and account conduct. Use the unsecured business loan calculator for a realistic range before you apply.
- A vehicle or machine: equipment finance lets the purchase itself act as the security.
- Larger amounts, home equity available: borrowing against your house through a home equity business loan, where a paid default rarely counts for much. If you’d rather go straight to a private lender, HomeSec funds business loans secured by residential or commercial property and says credit score isn’t the deciding factor.
- A bank loan: if the default is small, paid well over a year ago and your bank knows you, ask. Banks are often the cheapest money available, and a paid default isn’t an automatic no.
An illustrative timeline
A plumbing business owner had a $3,100 default listed by a car finance company in August 2023, after a separation left payments missed. They paid it in full in May 2024 and have kept every repayment on their home loan and work ute on time since.
In October 2026, they want $150k to buy a competitor’s customer list and van. Here’s how their file reads now:
- The default is about three years old and was paid more than two years ago.
- Their two-year repayment history is clean from end to end.
- The default will drop off in August 2028.
A non-bank lender is likely to treat the default as history, so the decision turns on turnover and bank statements. The bank may well consider it too, with the payout letter and a short explanation attached. Waiting until 2028 wouldn’t make sense here: the opportunity is now and the file already reads well.
Mistakes to avoid after paying a default
- Assuming paid means invisible. Always disclose it. The lender will see it on the check anyway.
- Not checking that the listing was updated. Creditors sometimes don’t update the status. Pull your reports and chase any that still show unpaid.
- Applying everywhere to test the waters. Each application adds an enquiry for five years, and a cluster of fresh enquiries can undo the good work of paying the default. See too many credit enquiries.
- Paying someone to remove it. A correctly listed paid default can’t be removed early, whatever a credit repair company says.
- Missing a repayment now. A new late payment hurts far more than an old paid default. Set up direct debits on everything.
For rebuilding tips, read how to improve your business credit score.
Paid it off? Let’s find the lender that sees it that way
Paying the debt was the difficult bit, and it’s behind you. The next step is matching your file to a lender whose policy treats a settled listing as the history it is.
It takes about a minute to send through the details, and enquiring won’t affect your credit score. We don’t pass your information around a crowd of lenders; your enquiry is reviewed by someone who knows this kind of file, and they’ll call you. Put in the real dates, the amount and when it was paid, which lets us steer you to a lender whose policy already suits your file.
Frequently asked questions
Does paying a default remove it from my credit file?
No. The creditor updates the listing to show it has been paid, but the default itself stays visible until its five-year retention period ends. Only a default that was listed incorrectly can be removed early.
When does a paid default come off my credit report?
Five years after the date it was first listed. Paying it doesn't restart that clock or extend it. Check the listing date on your Equifax and Experian reports, then add five years to know exactly when it drops off.
Can I get a bank business loan with a paid default?
It's possible, particularly if the default was small, paid some time ago, and your accounts and repayment history since are clean. Bank policies differ, so ask your own bank first. If it declines, non-bank and property-secured lenders are the usual next step.
Is a paid default better than a settled or part-paid one?
Lenders mostly care that the matter is closed and that you dealt with it. A debt settled for less than the full amount by agreement is generally still read as resolved. Keep the creditor's letter confirming the agreement and that nothing more is owed.
Should I wait until the default drops off before borrowing?
Only if the need can wait and the date is close. If the default drops off in a couple of months, waiting may unlock cheaper lenders. If it's years away and the business needs funds now, a lender that accepts paid defaults is usually the better path.