Q1. What is a default?

A default can be recorded on your credit file if your payment of $150 or more is overdue by 60 days or more. In basic terms, it is an overdue debt.

Q2. How do I know if I have a default?

In order to list a default on your credit file, your credit provider must:

1. Send you a written notice to try to recover the payment; and 2. Send you a written notice that it intends to list the default on your credit file if you do not pay the amount overdue.

To make sure you know about any defaults that are listed against your name it’s a good idea to request a free copy of your credit report each year from each credit reporting body in Australia. You can get a free summary of your Experian credit file right now at Credit Savvy.

Q3. How does a default impact my credit score?

Defaults on your credit file can negatively impact your credit score. It can potentially prevent you from being able to access credit in the future as it shows you have failed to pay off your debt in the past.

Take steps to make sure you don’t go into default:

• Pay all your bills on time (an easy way to help with this is to set up direct debits, so you don’t miss a payment) • Only apply for credit if and when you really need it and if you know you can afford the minimum repayments • Keep your contact details up to date with your credit providers so they are able to get in touch with you • If you’re having trouble keeping up with your repayments, contact your credit provider straight away as they may be able to vary your contract terms • Track your credit score and credit file for free with a service like Credit Savvy, so you know of any changes as soon as they happen.

Q4. I’ve paid off the debt, will the default be removed from my credit file?

Once a default is on your credit file it won’t be removed just because you pay it off. A default is recorded on your credit file for 5 years, even after the amount has been repaid. If you have paid off the debt, that payment can be noted on your file.

A default can only be removed if it is incorrect or out of date – so take the steps listed above and do your best to prevent getting one in the first place.

Q5. This default is a mistake, what can I do?

Mistakes can happen, which is why monitoring your credit file is so important. If you spot an error on your credit file, you should first contact the credit provider that provided the incorrect information. If they do not resolve the issue, you can also contact the credit reporting body, or ultimately escalate the matter to the industry ombudsman.