What is a Bad Credit Rating?

In Australia, a negative credit reporting system is used to record your credit related defaulting behaviors. This means a historical snapshot of your ability and commitment to repay your debts in a timely manner is kept on file. Financiers and lenders access this information and apply various risk assessment tools to produce a credit rating which measures your financial well-being and assesses the degree of risk associated with extending finance to you.


Therefore, any past defaults in repaying a debt may negatively impact your ability to obtain finance in the future as your bad credit history signifies to credit providers that you may be at higher risk of also not repaying future loans. It is vital that you pay your bills on time and ensure your accounts are always under control. This is particularly as Australia subscribes to a negative reporting system and once a default is recorded, it cannot be offset by compliant behavior.

How did I get a default listed on my credit file?

The most common type of overdue account reported on credit files is a “payment default” which arises as soon as you have an outstanding account of at least $100 which is more than 60 days overdue. Common examples include late payment of credit card debts, mobile phone bills or loan repayments. A payment default can be recorded on your credit file after 60 days if the credit provider has contacted you either in writing, in person or by telephone and attempted to recoup the outstanding amount.

If you do not respond to the credit provider’s attempt to contact you, they will consider that you are a missing or uncontactable debtor, in which case, your payment default is classified as a “clearout”. This enables credit providers to immediately list your default on your credit file even if 60 days has not yet elapsed since the payment fell due.

In some cases, the creditor may commence legal action to recover the outstanding debt and obtain judgment against you or initiate bankruptcy proceedings. Each of these events would also be notated on your credit file.

What happens if I pay my overdue account after it’s been listed on my credit file?

The relevant credit provider is legally compelled to update your credit file as soon as practicable to indicate that the debt is no longer overdue once you have paid the amount in full. However, the payment default will still remain on your credit file for a specific period of time before it can be removed, even if you subsequently pay the debt in full.

These records are subject to strict regulations making it difficult to remove a default from your credit file before the specified period has elapsed. This can generally be done if it can be demonstrated the credit provider breached the rules or was in error in listing the default against you.

How long do the defaults stay on my credit file?

The length of time a default remains on your credit file depends on the type of default. A payment default remains on your credit file for 5 years, even if the overdue amount is subsequently paid in full. If you chose to ignore the creditor, or fail to advise them of your current contact information, consequences of the clearout listed on your file would remain there for 7 years. The increased severity reflects the greater risk you may pose to potential creditors. Court judgments will remain on your credit file for 5 years while a bankruptcy will be listed for 7 years from the commencement date of your bankruptcy, even if this has since been discharged.

The dedicated team of Lawyers and Accountants at The Quinn Group can assist you with advice and assistance for your accounting and budgeting needs. If you find that are unable to pay your debts or need further advice on personal budgeting, contact us now by submitting an online enquiry form or call 1300 QUINNS or on +61 2 9223 9166.