How to remove a default from a credit file – Complete Guide

by | Nov 10, 2022

In Australia, a default on your credit report can significantly impact your credit score and borrowing capabilities. A default occurs when you miss payment obligations like loans or utility bills.

It can stay on your credit report for five years, making it challenging to obtain new credit. Consumer defaults are for debts of $150 or higher that are more than 60 days overdue. For commercial credit, a default can be any amount above $100.

Managing a default on your credit file carefully and taking the right steps to dispute inaccuracies or clear your debts can help you maintain a healthier credit score and improve your financial options.

Steps On How To Remove A Default From A Credit File

Removing a default from your credit file is a process that requires attention to detail, patience, and, sometimes, negotiation. Here’s a detailed look at the steps involved:

Obtain and Review Your Credit Reports

Access Reports: First, you need to get your credit reports from the major credit bureaus: Equifax, Experian, and Illion. You’re entitled to one free report from each bureau every 12 months through AnnualCreditReport.com.

Review for Defaults: Look for any defaults listed on your reports. Note the creditor, the date of the DefaultDefault, the amount, and any other relevant details.

Verify the Accuracy of the Default

Check Details: Confirm that the default details, such as the amount owed and the default date, are correct. Errors can occur, and you have the right to dispute inaccuracies.

Documentation: Gather any documentation related to the account, like payment records or correspondence with the creditor.

Dispute Inaccuracies

File a Dispute: If you find inaccuracies, dispute them with the credit bureau. It can often be done online through the bureau’s website. Provide evidence to support your dispute.

Follow-up: The credit bureau will investigate your dispute, usually within 30 days. They’ll check with the creditor and then update you on their findings.

Negotiate with the Creditor

Direct Communication: If the Default is accurate but due to special circumstances like financial hardship, contact the creditor directly. Explain your situation and see if you can negotiate a payment plan or settlement.

Request for Removal: If you can settle the debt or agree to a payment plan, ask the creditor if they would consider removing the DefaultDefault from your credit report as part of the agreement. It isn’t guaranteed, but some creditors may agree to this request.

Pay the Debt

Settle or Pay in Full: Paying the debt, whether in full or as negotiated, is crucial. A paid default looks better on your credit report than an unpaid one.

Proof of Payment: Always ask for a receipt or letter from the creditor confirming that the debt has been paid or settled.

Goodwill Letter

Write a Letter: If you’ve paid the debt, consider writing a goodwill letter to the creditor. Explain any extenuating circumstances that led to the DefaultDefault and request they remove it from your credit report as a goodwill gesture.

Wait for the DefaultDefault to expire naturally.

Expiration: If the Default is accurate and the creditor doesn’t agree to remove it, you’ll have to wait for it to expire. Defaults typically remain on your credit report for six years from the date of the first missed payment.

Prevent Future Defaults

Automate Payments: Set up automatic payments for your bills to prevent future defaults.

Regularly Review Your Credit Report: Check your credit report regularly to ensure there are no errors and to keep track of your financial health.

Hire A Professional

Fix Bad Credit provides a comprehensive service that includes understanding your credit report, identifying contestable reasons for defaults, preparing your case, and potentially escalating your case if initial outcomes are unsuccessful. 

We offer a no-hassle service, manage your case from start to finish with a higher success rate. Contact us.

 

What kind of defaults can you remove from your report?

You can remove defaults from your credit report primarily if they are inaccurately reported or if the lender made certain procedural mistakes or the credit reporting agency did.

 

Inaccurately Reported Defaults

Suppose a default was reported in error, such as being mistakenly attributed to you due to identity theft, or administrative errors, or being reported despite the debt being paid on time. In that case, you can dispute the accuracy of this information with the credit reporting agency or directly with the lender.

 

Defaults Due to Procedural Errors

If the lender fails to follow proper procedures before listing a default, such as not sending you the required notices or incorrectly dating the DefaultDefault, these defaults may be disputable.

 

Defaults on Disputed Debts

Suppose you’ve disputed a debt with a lender, like if you were overcharged or the service was not delivered as agreed, and they’ve nonetheless reported a default. In that case, you can have it removed by providing evidence of the dispute and its resolution in your favor.

 

Defaults Due to Hardship

While harder to remove, if you experienced significant hardship (such as illness or job loss) that directly led to the DefaultDefault, especially if you reached out to the lender to seek hardship consideration but were not appropriately accommodated, this might support your case for removal.

 

Defaults from Companies No Longer in Business

If a default is listed by a company that has since gone out of business or is unresponsive, you could have the DefaultDefault suppressed or removed due to the inability to verify the debt with the creditor.

Conclusion

Removing a default from your credit file can be challenging, especially if the Default is accurate. However, by verifying the accuracy of the Default, negotiating with creditors, and potentially settling the debt, you can improve your credit score and financial standing. Remember, maintaining open communication with creditors and monitoring your credit report is key to managing your credit effectively.

Questions & Answers

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What is a credit default?

A credit default occurs when you fail to meet the repayment obligations of a loan or bill, leading to a negative entry on your credit file. It includes missed payments on credit cards, loans, utility bills, etc. Defaults can significantly impact your ability to obtain credit in the future.

How long does a default stay on my credit report?

In Australia, a default can remain on your credit report for five years, affecting your credit score and borrowing capacity.

Can I remove a default from my credit file?

Yes, you can remove a default if it’s been listed in error, for example, due to inaccurate reporting, procedural mistakes by the lender, or a disputed debt that you successfully contest.

What if I've already paid the debt?

Paying off the debt will change the Default’sDefault’s status to ‘paid,’ which looks better to future lenders but does not remove the DefaultDefault from your credit report. The DefaultDefault will still expire five years from the date it was listed.

How does a default affect my credit score?

A default can significantly lower your credit score by indicating to potential lenders that you have previously failed to meet your credit obligations.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.