How Long Does it Take a Bad Credit Rating to Disappear?

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Your credit rating is essential to your financial health. While a good credit rating can enable you to obtain excellent financing offers for your home, car, or business, a bad credit rating can cost you thousands of dollars in interest and fees or worse, destroy your chances of obtaining funding at all. In order to understand a bad credit rating, it's important to understand how your credit rating is determined.

Australia uses a negative credit reporting system. This means that only negative information against you is reported on your credit file. Accounts in good standing are not listed; only those with problems or delinquencies. As such, negative accounts can dramatically affect your credit rating.

Overdue Accounts and Bankruptcies

There are two main types of overdue accounts: defaults and clearout. An overdue account becomes a default when the lender determines that the borrower is unwilling to repay the debt. An overdue account becomes known as a clearout listing when the creditor is unable to reach the borrower. The distinction between these types of overdue accounts is important because each remains on your credit file for a different period of time.

How Long Do Overdue Accounts Stay on My Credit File?

  • Overdue accounts reported as a default on your credit file will remain on the report for five years from the date of listing.
  • Overdue accounts reported as a clearout will remain on the file for seven years from the date of listing. These entries will remain on your credit file even after the account has been resolved; however, the entry will be updated to show that the balance was paid in full, settled, or brought up to date.

Overdue accounts are not the only negative listing that can appear on your credit report. Bankruptcies are also reported to the credit bureaus. Bankruptcies will remain on your credit file for 7 years from the date the bankruptcy was listed.

What About the Statute of Limitations?

The statute of limitations sets a legal limit on the amount of time an individual (or lender) has to proceed with legal proceedings after a certain event such as a debt. In some cases, you may be able to defend yourself against a debt that has not been proven as yours. Usually, a debt can be argued as "statute-barred" if you have not made a payment or confirmed the debt as yours for a long period of time (and no legal action has been taken to collect the debt). In general, six years must pass before the statute of limitations can be claimed; however, the Northern Territory allows for a debt to become statute-barred in only three years.


If a debt is declared as statute-barred, the court system will not enforce any collection attempts by the lender; however the negative listing will still appear on your credit file for five or seven years, depending on the type of listing.

Should I Pay on Old Debts?

Because the credit rating system in Australia includes only negative events, paying on an old debt will not improve your credit rating. The negative listing will not disappear from the credit file before the five or seven year period, even if you repay the debt in full. Repaying an old debt can also affect the statute of limitations on a debt. If you make a payment on a debt, the clock on the statute-barred debt exemption restarts. In other words, if you haven't made a payment on or established ownership of a debt in four years, making a payment in year four will reset the statutes-barred clock to zero.

What if the Negative Listing Doesn't Belong to Me?

If you see a mistake on your credit file, you must take steps to remove the inaccurate information. To do this, contact the lender associated with the error to inform them of the problem. Provide the lender with information about the account, including the reference number and other identifying details, so that they can conduct an investigation of the matter.

If the lender finds that the disputed account was incorrectly reported as yours or as overdue, they are then required to contact the credit bureau so that the inaccurate listings can be erased from your credit file. You should also send a copy of the dispute to both credit agencies so that the account in question can be marked as "disputed" until the issue is resolved.

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