Having a default listed on your credit report significantly reduces your credit score and can hamper your ability to get new loans. So, if you default a payment, how can you get a default removed from your credit report? In this post, we will answer this question and outline some of the kind of defaults that you can dispute and remove from your credit report.
But first, what exactly is a default?
A default (also known as a payment default) is basically an overdue debt of $150 or higher, that is more than 60 days overdue, that has not been addressed and is listed on your credit report by the credit provider as a ‘default’. Common examples of defaults include telephone and power bills.
Can you erase the default from your credit report?
You can remove a default from your credit report only if you prove that it was erroneously or incorrectly entered in your name. In other words, you can only correct mistakes on your credit report, but not remove correct entries from it. This means that if a default was entered correctly, you’ll have to wait for five years for it to be erased from your credit report. Even if you pay the default during the period, only the status of the default will be changed to “paid” and it will still appear on your report.
What kind of defaults can you remove from your report?
Here are some situations in which you can remove a default from your report.
1. Incorrect default in your name
If you find out your credit report shows a default for a loan that you didn’t take, you can dispute it with the credit reporting company or the credit provider and get it removed from your report. Such cases can occur due to mistaken identity or fraudulent activity, so you need to regularly check your credit report to spot them timely and get them rectified.
2. Defaults not meeting the minimum stipulated default requirements
If your repayment of $150 or more is overdue by more than 60 days, the credit provider is, by law, required to send you two written notices before listing a default. If you didn’t get such notices, or a default is listed in your name without meeting the $150 or 60-day conditions, you can dispute the entry with the credit reporting agency.
3. Defaults older than 5 years
Defaults that are older than 5 years are removed from your credit report. So, if your report still has older defaults, you can get them removed.
4. Default within the Hardship Assistance notice period
You have the option to seek “hardship assistance” from your lender if you struggle to repay the loan. Hardship assistance is a written notice sent to a lender requesting a repayment arrangement, and the notice for such a request is called a hardship notice. By law, the credit provider can’t list a default while making a decision on your hardship notice and for 14 days after sending you a response. This means that if the credit provider listed a default during this period, you can get it removed from your report. However, you’ll have to prove that you sent the credit provider a hardship notice and that a default was listed during or before the 14-day period from the date of the hardship assistance response.
5. Default due to natural disasters or factors beyond your control
You can expunge a default if you are able to prove that the default was a result of an error, such as bank’s failure to make automatic deduction, or a natural disaster that prevented you from making the repayment. In other words, you’ll have to show that the missed payment occurred because of conditions beyond your control. And you’ll have to show a repayment arrangement with the credit provider for settling the overdue debt to convince the credit reporting agency to remove the default from your file.
6. Statute barred debts
If you have stopped making your debt repayments for a fixed number of years, the debt will be called ‘statute barred’, and you can get it removed from your credit report. In Australia, most debts get statute barred after non-payment for a continuous period of six years. However, you need to check the local state laws and the type of debt to determine the exact duration after which the debt becomes statute barred.
How can you request a correction in your credit report?
Credit reporting agencies in Australia, such as Equifax, Experian, and Illion, provide free reports to consumers once every three months. So, you need to get these free reports every quarter and read them carefully if you want to timely spot and correct mistakes in your credit report. Below is the process for requesting a correction in your credit report if you have an incorrect default.
- Most credit reporting agencies have online correction portals on their websites, which allow you to lodge your correct request electronically. You’ll have to provide your personal details, including name, date of birth, residence address, driving licence, etc for verification of your identity. You also will have to provide details of the entry you want to dispute. For example, you should include account reference numbers, credit provider, reason of dispute, and relevant documentation, which will make it easier for credit reporting agencies to resolve your case. You can also submit your request by postal mail as well.
- After you submit your correction request, the credit reporting agency will acknowledge you in writing about the receipt of your request.
- The credit reporting agency investigates your request and usually gives you a response within 30 days from the date it acknowledges your request. The investigation process includes contacting the credit provider as well as vouching the documentary evidence you submitted in your correction request.
- After completing the investigation, the credit reporting agency sends you a letter, notifying you about the outcome of your request.
In short, you can get a default removed from your credit report if it was erroneously or wrongly entered. If the default was listed correctly, you’ll have to wait for five years to get it automatically removed from your credit report. But you don’t need to worry as you can still expunge some defaults. This article outlined various default situations under which you can get a default removed from your credit report.