Can you get a home loan with a paid or unpaid default?

Paid tells the lender you have dealt with the overdue amount. Unpaid means it is still owing. Once you have paid, ask the provider to update the listing and check whether anything else remains on the account or it has been closed.

Paying does not erase the default. The lender can still see the amount, age and type of debt, then look at how you have managed repayments since.

A paid phone default from 3 years ago tells a different story from a personal loan you have recently fallen behind on. I check how each lender treats that history, even after the listing shows as paid.

If the creditor agrees to accept a smaller payment to settle the overdue debt, that also counts as paid for consumer credit reporting. Get that agreement in writing and keep the receipt. Paying only part of the balance without an agreement leaves the rest owing.

The rule is in Schedule 2, section 10 of the Privacy (Credit Reporting) Code 2025.

If the lender asks why you paid less than the original balance, the written settlement agreement and receipt explain it.

• the receipt or payout confirmation
• a letter from the creditor or collection agency confirming payment
• the updated credit report showing the paid status
• a short timeline of what happened and why it will not happen again

One late payment is not enough by itself. A consumer-credit default generally needs an overdue amount of at least $150 that has been unpaid for at least 60 days. The provider must also send the required notices. Your month-by-month payment record is separate and stays on the report for 2 years.

First, the provider must send a notice asking you to pay. It then has to wait at least 30 days before sending a second notice warning that it intends to list the default. After that second notice, it must wait at least 14 days to list it, but no longer than 3 months.

An old address does not automatically make a default wrong. If you hadn't told the provider you'd moved, it may have met the rules by writing to your last known address. Ask for copies of the notices if you think it used the wrong details.

Ask the credit provider or credit reporting body to correct it. This is free. Explain what is wrong and attach the evidence.

It might be someone else's account, an incorrect amount, a default listed after you'd paid the overdue debt, or a notice that wasn't sent correctly.

You can start with either the provider or the credit reporting body. They must contact the other organisations involved if needed, so you shouldn't have to chase each one yourself. If they agree the information is wrong, they must take reasonable steps to fix it within 30 days unless you agree to more time. Ask for the answer in writing, then check a fresh report.

If the dates or notices do not make sense, get the account history before deciding whether to pay. If the dispute is not resolved, AFCA or the OAIC may be able to help.

Before using your savings to pay a large default, subtract the payout and buying costs, then allow for the cash you want to keep aside. Clearing the debt may open a lender option, but you still need enough left to buy. I check both figures before you spend the money.

If paying the debt would leave you unable to cover essentials, speak with the National Debt Helpline on 1800 007 007 before committing to another loan.

Sometimes you can use the new loan to pay the default at settlement. But accepting an unpaid default is not the same as agreeing to fund its payout. I check that the lender allows both, you have enough equity and you can afford the new repayments.

1. Get a current payout figure and confirm who owns the debt.
2. Ask whether the proposed loan can include that amount and the fees.
3. If required by the lender, arrange for the settlement agent to pay the creditor directly.
4. Keep proof of payment and check that the credit report shows the updated status.

Adding the debt to your mortgage puts your home behind it. A smaller monthly payment can be appealing, but you could pay more interest by stretching the debt over the remaining home-loan term. Our debt consolidation guide shows how to compare the interest and fees.

Give the assessor a short timeline:

1. what the debt was
2. when and why it fell behind
3. how you found out
4. when it was paid or what the payout plan is
5. what has changed since
6. statements showing your payments since

Use our explanation-letter examples to organise the dates and evidence. If the defaults followed a separation, also check who remains responsible for joint debts.

Keep the timeline short and attach the documents that support it.

There is no single dollar limit that every lender accepts. Your deposit and the rest of the credit report still matter. The lender also checks whether your income covers the proposed repayments, living costs and other debts.

The same default can fit one lender and fail another. It can also put you in a different product at the same lender, with a different cost. Macquarie and Bluestone have different limits, as the table below shows.

Macquarie rules checked 29 September 2026. Bluestone defaults checked against its Product Guide, effective for applications received from 7 October 2026, read 8 October 2026. I still check the loan limits, costs and the rest of your application before recommending an option.

If a specialist loan is worth considering, our Pepper Money, Resimac and Liberty reviews explain the differences. I would compare the cost of borrowing now with waiting for a cheaper option before assuming you need a specialist lender.

Paying the creditor today does not mean your report changes today. Keep the receipt and ask the provider in writing to report the payment. The code requires it to take reasonable steps to send the update within 3 business days of your request or the payment clearing, whichever is later, unless it has reasonable grounds for needing longer. Allow for the report itself to update after that.

If you are working towards a finance deadline, I check whether the selected lender can use the payment evidence while the report is updating. Do not send another application and hope the old unpaid label is overlooked.

If the default sits beside hardship, insolvency or tax debt, return to the bad credit home loan guide and start with the event causing the current decline.

Client examples are based on real situations. Names and identifying details have been changed.