Getting a business loan with defaults on your credit file

A default is a listing a credit provider may disclose only after a defined sequence has run: the overdue payment is $150 or more, it has been overdue at least 60 days, and two separate written notices have gone to your last known address, the second no less than 30 days after the first, with the listing made at least 14 days after that second notice and no later than three months after it. Once listed it stays for five years whether you pay it or not. Paying in full does not remove it — it adds a separate statement that the amount has now been paid, which the provider must take reasonable steps to disclose within three business days of the later of your request and the payment.

What a default listing actually is

A default is not a lender's opinion of you and it is not a score. It is a specific record, and the rules that govern when it may exist are tighter than almost anyone realises. Under the Privacy (Credit Reporting) Code 2025 and the Office of the Australian Information Commissioner's own guidance, a credit provider may disclose an overdue payment as a default only where the amount is $150 or more and it has been overdue for at least 60 days — and only after two separate written notices.

The two notices are the part worth knowing, because they are a sequence with dates attached. The first tells you about the overdue payment and asks you to pay it. The second is a notice of the intention to disclose, and the Code says it cannot be given less than 30 days after the first. Both go to your last known address, and either can be emailed where that is how the provider usually writes to you. The listing itself can then be made at least 14 days after that second notice, and no later than three months after it.

Add it up and a valid default is the end of a process that took the better part of three months and put two letters in front of you. That matters for a practical reason: a business owner who remembers neither letter, and whose mail was going to an old registered office or a former accountant, has something specific to ask about rather than a general sense of unfairness.

You are not the first one this week

Most people who find a default on their file go to their bank first, and the bank says no. Not because the loan would not be repaid, but because a credit policy written for a different purpose has a line in it about listings, and the listing is there in black and white for five years. Those are the things a bank exists to care about. None of them says anything about whether there is equity in the building.

That gap is where HomeSec has been since 2004. We are not here to judge how a bad quarter went — it is one of the situations we see most, which is why we also write about business loans for borrowers with bad credit. What we look at is whether there is enough unused equity in real property and whether the purpose is a genuine business one: not financials, not a credit score, not whether everything is up to date, and no interrogation about the last two years. From a clean, complete scenario funds can be available in as little as 24 hours, and interest can be capitalised for up to six months, so nothing is payable while the business gets its feet back under it.

Back to the file itself, because what you do about the listing is a separate question from where the money comes from.

What paying it does, and what it does not

It does not remove it. A default stays on the credit report for five years on the OAIC's own retention table, and the five years run from the listing rather than from the day the debt was cleared. This is the sentence that surprises people most, and it is worth being blunt about: paying a default in order to get it off the file does not work.

What paying does instead is create a second, separate record alongside it. The Code calls it payment information — a statement that an amount previously disclosed as a default has now been paid — and it is triggered in three ways rather than one.

1. 1
   Cleared funds for the full amount.Not the principal alone. The Code says the full amount of the overdue payment, including all interest, fees and other amounts that were inside the figure the provider listed. A part payment that leaves the fees behind does not trigger it.
2. 2
   Less than the full amount, accepted in full settlement.Where the provider takes a lesser figure and accepts it in full settlement of the overdue payment, the amount is taken to be paid for this purpose. Which is why a settlement is worth putting in writing in those words.
3. 3
   The provider waives it.Same effect. Rare, but it is in the Code as one of the three triggers.

Then one step that almost nobody takes: ask for it. Where the provider has the obligation and you ask it to disclose the payment information, it must take reasonable steps to do so within three business days of the later of your request and the date the payment is taken to have been made, unless it has reasonable grounds for needing longer. A written request on the day the money clears turns an open-ended wait into a three-day one.

Repayment history is a different record, and a finer one

Plenty of business owners come to us convinced the file is clean because there is no default on it. Often there is something else on it instead. Repayment history is recorded as a number from 0 to 7 showing the age, in months, of the oldest missed payment, and a payment counts as missed once it is more than 14 days past its due date. It stays for two years.

So an account that was always paid, just consistently late, leaves a trail that never gets near the $150 and 60-day threshold a default needs. To a lender reading the file, a run of those months can say more about the last two years than a single default from four years ago does — which cuts both ways, and is worth knowing before deciding which part of the file to worry about.

The rest of the file sits on the same retention table: a court judgment and a credit enquiry for five years, financial hardship information for one, and a serious credit infringement — the only listing that outlasts a default — for seven. What a cash flow lender's decline actually means covers the enquiry a declined application leaves behind, and why a run of applications is the real damage.

The company's file and yours are not the same record

The figures above — the $150, the 60 days, the two notices, the five years — come from the credit reporting rules in the Privacy Act, and those rules are about personal information. They describe a listing against you as an individual. A credit file kept about the company is a separate record under different rules, which is why a director can be told the company is "clear" and still be read as a risk, or the reverse. Borrowing with an ATO judgment goes through that distinction properly for judgments, and the same logic applies here.

The two records do meet at the point that matters for a business loan. The credit reporting laws decide when a credit provider may handle your personal consumer credit report in connection with a commercial credit application — so a director's own default is not walled off from a business facility, and most of the time it is exactly what the declining lender was looking at.

If the sequence was not followed

Then there is something concrete to raise, and it is a better use of a fortnight than rehearsing why the quarter went badly. A listing where the amount was under $150, where 60 days had not passed, where only one notice was sent, where the second came less than 30 days after the first, or where the listing was made more than three months after the second notice is a listing worth querying against the Code's own wording.

Raise it with the credit provider first; a credit reporting body can also be asked directly. A correction costs nothing, has to be made within 30 days or a longer period you agree to, and a refusal has to be explained to you in writing with reasons, with an external dispute resolution scheme available after that. The guide to credit declines sets those rights out in full. What it cannot do is make a correctly listed default disappear, and a fortnight spent hoping otherwise is a fortnight the business may not have.

What a secured loan can actually do here

It changes which question is being asked. A lender reading a bank feed and a credit file has nothing else to read, so a listing carries the whole weight of the decision. A lender secured against real property is sizing the loan from the equity, which is why the answer can be different without anything about the file having changed. What "no credit check" honestly means and what a caveat lender actually checks cover what is and is not pulled. Where the money is needed behind an existing first mortgage, a second mortgage with bad credit is the closer answer.

There is also a narrow case where borrowing genuinely improves the file rather than working around it: clearing the full listed amount is what triggers the payment statement above, and the three-business-day rule then applies. That is not a repair — the default still runs its five years — but a paid listing reads differently to the next lender than an open one, and the difference is worth having if the money is being raised anyway.

When borrowing is not the answer

Said plainly, because a default is the moment at which another loan is most tempting and least examined.

If the listing is not an old scar but the leading edge of something still happening — if the missed payments are this quarter's, and the repayment history number is climbing — then the problem is the trading position and not the file, and more capital postpones the decision rather than making it. ASIC's instruction to a director of an insolvent company is four words long: do not incur further debt. Borrowing against the family's equity to pay old listings while new ones are still forming is how somebody loses the house as well as the company, and we would rather say so on the first call than after a valuation.

Three narrower cases where the answer is also no. Where the only purpose is cosmetic — paying a five-year listing that has two months left to run, to tidy a file that is about to tidy itself — the arithmetic does not work. Where the amount needed is below $20,000 we do not lend to it at all, because registering a security over a property for a figure that size is the wrong tool for the job. And where there is no equity in real property, a secured loan is not our answer either, and the useful calls are to your accountant, to a registered liquidator about small business restructuring, or to the Small Business Debt Helpline on 1800 413 828, which is free, independent and confidential.

This page explains what a default listing is, what the credit reporting rules require before one can be made, and what the rules allow you to see and correct. It is general information, not legal, credit or insolvency advice: what to do in your circumstances is a question for your accountant, a commercial solicitor or a registered liquidator. The Privacy (Credit Reporting) Code 2025 and the Office of the Australian Information Commissioner's credit reporting guidance are the primary sources behind every figure above, and the Privacy Act 1988 is the Act they sit under. Read your own notices and your own credit report alongside them.

Reviewed by Paul Stone, Joint Chief Executive