That Home Loan Hub
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That Home Loan Hub
Why Paying Off Defaults Fast Matters For Your Credit
A default doesn’t just show a missed bill; it tells a story about how you handle money when life gets messy—and when it gets better. We dig into what a default really signals to lenders, why sticking to a bare-minimum payment plan can hurt your borrowing power, and how speeding up repayment once your situation improves can change the narrative on your credit report.
We share the real-life triggers behind most defaults—breakups, job loss, shifting priorities—and the blind spot that catches people out: keeping the hardship-sized payment long after income recovers. Banks factor in the three C’s of lending, and the time you took to clear a default speaks directly to character. That’s why a two- or three-year repayment on a small debt can raise more questions than the default itself. We also tackle the relationship trap where stubbornness over “whose debt it is” drags out damage that lands solely on the person named on the loan.
Already have a mortgage? A top-up for a car or solar still counts as a new credit event. Your bank will recheck your credit file and scrutinise your conduct across all accounts. With defaults visible for seven years, each new application means retelling the story—so make it a strong one. We outline clear, practical steps: get your credit report, negotiate a settlement or faster plan, document your hardship and recovery, and prioritise the default ahead of extras. The aim is simple: shorten the timeline, strengthen your character signal, and protect your options and rates.
Ready to reset your credit story? Listen now, then share this with someone who needs a nudge to clear a lingering default. Subscribe for more straight-talking money guidance, and leave a review to tell us what topic you want next.
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If your credit check has ever been affected by various defaults because of the mistakes of the past and that happens, listen up. This is the episode for you. I've got Cunch in the house and we're gonna talk about defaults and the time you take to pay them off. Yes. Go for it.
SPEAKER_00:Kiola team. Yeah, I thought we'll cover off that hot topic. Obviously, a default is when you haven't paid like a your bill, your personal loan, your credit card, or something like that, and it defaults through to a collection agency and then it shows up on your credit check. Then you're like, oh, okay, we'll set up a payment arrangement or something with your that debt collection agency. So the agent agrees, okay,$50, you know, a month or a week, a fortnight, a month. And you're like, yep, cool, sweet. And none behold, right? Because you're like, okay, well, I've made that arrangement. It's kind of like the arrangement I already had with the loan agreement. So I'm just gonna keep paying that$50 a fortnight, and it's taking me, you know, three years, two years to pay it. And you're like, sweethead.
SPEAKER_01:Right? I think we did a similar episode a few weeks ago, two months ago.
SPEAKER_02:And the key here is the reason sometimes it does go, let me rewind a little bit. The the reason it does go to credit collection sometimes because of lifestyle situations, right? There might be a marriage breakup, there might be a relationship breakup, there might be job challenges, you might have lost a job, looking for a new job, etc. And then your lender might have and you've forgotten about to pay certain bills or you would have prioritized certain bills over other bills. So your lender would send your bill to a credit collection agency. And at that point, that might be a few months later, so six months later, your life actually looks better now. You might have got a new partner, or you might have got out of debt, or you might have got a new job. So your life is much better. But you set up a new repayment schedule with the debt collection agency. And because they've set it up an absolute minimum at the time of your suffering, and you didn't change it when your suffering has ended, when you actually lend it a better job and you've got more money now to pay for it, you just thought, oh well, I'm just gonna pay for it, whatever it is, because why should I bother paying more? Right? And this is where we see things go wrong. Yeah.
SPEAKER_00:Yeah. I I guess it's more it isn't the educational piece, right? You're thinking, oh, well, I've already made that payment arrangement, I can carry on with life. However, once uh you know it's paid, it actually shows on your credit check how long it's taken you to pay it. So most lenders are going to ask the question, why did it take you so long to pay it? And that also comes down to the is it three canons of lending, we call it the three C's, which is you know, character. So it comes down to your character, and they want to understand, you know, why did it take you two or three years to pay off this default?
SPEAKER_02:Exactly. Like there will be understanding that look, crap does happen in life. Yeah, life life happens to people, but then it's how you went about when the life did change for them.
SPEAKER_00:Yeah, how you went about making those changes and taking responsibility to pay those commitments. Yeah, so it's morely if you do have a default, prioritize that and get that paid as soon as you can. Don't take, you know, two or three years.
SPEAKER_02:If you can manage to pay it off quickly, that's what I also sometimes see those situations happen as a result of stubbornness. And like, for instance, if there was a relationship, right, Mrs. took out a loan for the mister, the relationship breaks down, Mr. stops paying that loan because he's like, Well, stuff you we're no longer together, I don't care about this. And then she's stuck with that loan, and she goes, Well, I'm not gonna pay it because it's yours. Yeah, and then it goes to the credit collections, and then she doesn't want to pay for that, or he doesn't want to pay for it, right? If it's a the reverse, because they are stubborn in the sense of this is not my loan, this is not my debt, why should I be paying for it? This is not fair, yeah. But the problem in the bank's eyes, correct, you took out that loan, it's your name.
SPEAKER_00:Responsibility, yeah. You're responsible for it. You sign that contract to say I'm responsible for it. And you can't just turn around and go, No, don't want to do it anymore.
SPEAKER_02:And this is where I've seen stubbornness get in the way of people getting ahead in life. Correct. And this episode is more for us to show you that hey, we understand, we feel you, we've seen those situations, but only you can change the future. Yeah.
SPEAKER_00:It's a it's just a recommendation to if you can, you know, pay it off faster. That's what we would recommend for you to prioritize first and foremost.
SPEAKER_02:And then deal with the rest with the rest later. Deal with the default as quick as you can. Yeah. So deal with the default, get your name cleared because that will prevent you from obtaining future finance, especially with the banks. Yeah, yeah, it definitely will make it difficult. Yeah, and we've seen it. We've seen it so many times. And the other point as well, I want to make is sometimes people don't realize that even when you go back for top-up, yeah, like let's say they got a home loan, everything is good, and then something happens, something goes to the default collections agency, and then clients come back to us and they want to get a top-up for a car, a solar panel, whatever. It's still a new credit event in the bank's eyes. So just because you've got a mortgage already with the bank, it's not guaranteed that you'll get a top-up. Correct. You still have to be of a good character and show that you're still paying other bills as well, not just your mortgage.
SPEAKER_00:Well, that default is on your credit check for seven years. So it's a whole seven years that we we or you have to explain that story every time. Yeah.
SPEAKER_02:And I think sometimes people think that, oh, well, I already have a mortgage with the bank. Surely they should just keep looking after me and giving me the top up. No. No. Every time you want more money from the bank, that's in check. Yeah, your credit check. They check your credit check. Awesome. Well, we hope that this has been useful to you guys. And if there is any other topic you wish for us to cover, let us know. Thank you.
SPEAKER_00:Thank you.
