Can I Get a Home Loan With a Credit Default in Australia? (2026)
A credit default does not automatically disqualify you from getting a home loan in Australia — but it significantly affects which lenders will consider your application and on what terms. The impact depends on the type of default, the amount, how old it is, and whether it has been paid.
What Is a Credit Default?
A credit default is recorded on your credit file when you miss a payment of $150 or more by at least 60 days, and the creditor has followed the required notification process. Defaults are listed by:
- Telecoms companies (Telstra, Optus, TPG etc.)
- Utility providers
- Credit card companies and banks
- Buy Now Pay Later providers (increasingly)
- Other creditors
Defaults remain on your credit file for 5 years from the date of listing.
Paid vs Unpaid Defaults
Unpaid default: The debt is still outstanding. This is viewed most severely by lenders.
Paid/satisfied default: The debt has been paid, but the default listing remains. Most lenders view satisfied defaults more favourably than unpaid.
Note: Paying a default does NOT remove it from your credit file — it remains for 5 years from the date it was listed, but is marked as “paid.”
How Defaults Affect Home Loan Options
| Default profile | Likely lender access |
|---|---|
| Single small default ($0–$500), paid, 3+ years old | Some mainstream lenders may overlook; many specialist lenders |
| Single default ($500–$2,000), paid, 2+ years old | Specialist/non-conforming lenders; higher deposit required |
| Multiple defaults (any amount) | Non-conforming lenders only; large deposit; higher rate |
| Any unpaid default | Non-conforming lenders only until paid |
| Default in last 12 months | Very limited options; significant deposit required |
| Default over $5,000 (regardless of payment status) | Non-conforming lenders; careful assessment |
Default Severity — What Matters Most
Type of creditor: A default with a major bank or lender is viewed more severely than a small telco default.
Amount: Larger defaults signal a more significant financial difficulty.
Recency: A 12-month-old default is far more concerning to lenders than a 4-year-old default.
Multiple defaults: Multiple defaults — even small ones — raise concerns about a pattern of financial mismanagement.
Cause: Some lenders (particularly non-conforming ones) consider the reason for the default. A default during a period of medical leave, job loss, or relationship breakdown is viewed differently from ongoing poor financial management.
Finding a Lender With a Default
Non-conforming (specialist) lenders: These lenders specialise in applications that do not fit mainstream bank credit policies. They accept defaults more readily but charge:
- Higher interest rates (rate loading, typically 1–3% above standard variable)
- Lower maximum LVR (often 80% or less)
- Higher application fees
Mortgage brokers: A broker who specialises in adverse credit knows which specific lenders will consider your profile — and can submit to the right lender without creating unnecessary credit enquiries on your file.
Checking and Disputing Your Credit File
Get your free credit report: All Australians are entitled to a free credit report from each of the three bureaus:
- Equifax (equifax.com.au)
- Illion (illion.com.au)
- Experian (experian.com.au)
Check for errors: Defaults listed in error, expired defaults still showing, or defaults for accounts you never opened do occur. Dispute any errors directly with the credit bureau — they must investigate within 30 days.
Dispute process: Contact the credit bureau and the listing creditor. Provide evidence of error. If the default was listed without proper notification (creditor must send a notice to your last known address), it may be removable.
Frequently Asked Questions
I have a $400 Telstra default that’s 2 years old and paid. Can I get a home loan?
This is a common situation. Many specialist lenders will consider this — particularly with a 20% deposit and stable employment. Some mainstream lenders with flexible policies may also consider it. A broker can identify which lender is most appropriate.
Can I pay off a default and get it removed immediately?
No — paying a default changes its status from “unpaid” to “paid” but does not remove it from your credit file. It remains for 5 years from the listing date. The only way to have a default removed early is if it was listed in error.
I dispute the default — what can I do?
Contact the credit bureau with evidence that the default is inaccurate — you were not properly notified, the amount is wrong, the account was not yours, or the debt was paid before listing. The bureau must investigate and correct or remove errors.
Related Guides
- Can I Get a Home Loan With Bad Credit?
- Can I Get a Home Loan After Bankruptcy?
- Credit Score and Home Loans Australia
- Can I Get a Home Loan? — Eligibility Hub
This article provides general information about home loan eligibility with a credit default in Australia. Lending policies vary. For complex credit situations, work with a licensed mortgage broker specialising in adverse credit. Find one through MoneySmart.