Why “Paid” vs “Unpaid” Changes Everything
Two borrowers, identical $800 defaults. One paid it last year; one never got around to it. At several lenders, the first is approvable and the second is an automatic decline — same debt, same size, completely different outcome.
A default doesn’t come off your file when you pay it — it stays for five years either way. What changes is the label: lenders read a paid default as a problem you fixed, and an unpaidone as a problem you’re still in. That single word moves you between pricing tiers, and sometimes between a yes and a no.
What Legally Counts as a Default
Not every missed bill becomes a default. To list one, a credit provider needs:
- a debt of $150 or more,
- 60+ days overdue, and
- to have followed the notice requirements — written warnings to your last known address before listing.
Miss any of those and the listing is disputable. Smaller slip-ups show up instead in your repayment history (RHI)— the month-by-month grid of green ticks and numbers that sits on your file for 2 years. RHI isn’t a default, but banks’ automated rules read it just as unforgivingly:
The Severity Ladder (July 2026 Policy)
| Tier | What’s accepted right now |
|---|---|
| Mainstream — full-price loans, tiny tolerance | Suncorp: max 2 utility defaults totalling ≤$500, paid. Macquarie: paid non-financial defaults ≤$500 with an explanation; anything outstanding is unacceptable. Firstmac: financial-institution defaults are a decline; a paid telco/utility default ≤$1,000 may pass. |
| Near-prime — small risk premium | Pepper Near Prime Clear and Brighten Near Prime: defaults up to $1,000, paid or unpaid. Brighten also takes unlimited paid defaults over $1,000 once the listing is more than 24 months old (capped at 80% LVR). |
| Specialist — priced for risk, up to 95% on a purchase | Pepper: unlimited defaults ≤$3,000 each, paid or unpaid; larger ones accepted once listed 12–24 months. Its highest tier takes unlimited listings from one credit event even inside 12 months. Resimac: defaults under $2,000 accepted, with all listings from one life event within 6 months grouped as a single credit event. Mortgage Street: tiers up to $100K+ of aggregate defaults at 80% LVR. |
Policies current at July 2026; every scenario is assessed individually. First home buyers are restricted to lower-severity tiers with some lenders.
The “One Credit Event” Concept
A divorce, an illness or a business failure rarely produces one tidy default — it produces five, all listed within a few months of each other. Several specialist lenders recognise this and assess all listings from a single life event as onecredit event rather than five separate strikes. Presented properly, “a bad six months, finished, with clean conduct since” lands you tiers better than the same file presented as a list of five defaults. This is exactly the kind of framing a well-evidenced explanation letter does.
Your Playbook
- Pull all three bureau files (Equifax, Experian, Illion — free) and list every default: amount, listing date, paid status.
- Dispute anything incorrect.Wrong amounts, missing notices, debts that aren’t yours — disputes are free, and there’s no wrong door: the credit provider, the bureau, then AFCA/OAIC.
- Pay what’s small and real. Paid beats unpaid at every tier — and some lenders can pay larger defaults out from the loan at settlement.
- Stop creating enquiries while you fix the file — every application leaves a mark.
- Match the lender to the file — the ladder above is why one decline means nothing and five declines are self-inflicted. Also check hardship flags — they hide next to clean-looking RHI and trip different rules again.
Send us your credit file before you apply anywhere. We’ll tell you which defaults matter, which don’t, what to pay and which lender’s rulebook your file actually fits. Call 1300 088 065 or book a free assessment online.