What is a default?

A default is also known as an overdue debt. There are two types of defaults; consumer and commercial payment defaults.

Consumer payment default
A consumer payment default can be reported by a credit provider and listed on your Credit Report. This can only occur if you have an overdue debt of equal to, or more than, $150 that is more than 60 days overdue. For example, if you have a mobile phone bill of over $150 and it was due more than 60 days ago, your phone company can have it listed on your Credit Report as a payment default.

Before reporting a consumer default, the credit provider must take a number of steps. In particular, it must send two separate written notices to your last known address. The first notice will be a final request for payment and the second will be a warning that the overdue payment will soon be listed with a credit reporting body (such as Equifax).

Commercial payment defaults
In the case of commercial credit, the minimum default amount is $100. Before listing commercial defaults or overdue debts, commercial credit providers (or their agents) must send a notice to your last known address stating their intention to list the default amount with a credit reporting body (such as Equifax).

Potential credit providers may look unfavourably on applicants with a history of overdue accounts. If you want to maintain your creditworthiness, it’s a good idea to avoid defaults getting onto your Credit Report. To do this, make your repayments and pay your bills on or before the due date.

Both consumer and commercial payment defaults may stay on your credit report for five years, even when you have paid the entire overdue amount. When you have paid a default, the status is updated to ‘paid’ which can be looked upon more favourably by lenders but it will remain as part of your credit history.

If there is a new arrangement in place that is wholly and partially related to any of your defaults, this will also be displayed in the Overdue Accounts section of your credit report.

Learn more: CreditSmart and MoneySmart have information to help you understand defaults.