The difference between defaults and serious credit infringements

Elizabeth Barry 4 January 2017

finding out about a default

Defaults and serious credit infringements have a negative effect on your credit score. Learn the difference between the two and how to avoid both to keep your credit record clean.

Credit scores are used to assess someone's suitability for a loan. A poor credit score can make it difficult for you to get a loan.

If you do not pay off a debt, you risk having a default listed on your credit history. Defaults can turn into serious credit infringements if the creditor is unable to make contact with you and your debt remains unpaid.

Find out more about these two listings so you can avoid having them recorded on your file.

What is a serious credit infringement?

A serious credit infringement is when you appear, intentionally or not, to be running away or hiding from a creditor. If you have overdue debts and have left, or appear to have left, your last known address without providing a new address, the creditor can report you for serious credit infringement.

In the case of a business, this is called a commercial credit clearout. Your creditor can list a commercial credit clearout against you if you have a debt and have left your last known address without providing a forwarding address.

How is a serious credit infringement different from a default?

A default is simply an overdue debt. The debt has to be worth more than $150 and more than 60 days overdue before a creditor can list it as a default.

A serious credit infringement is really an unmanaged default. It occurs when a default has occurred and the creditor cannot find you to rectify the situation. A serious credit infringement has a greater impact on your credit score than a default. Creditors may be reluctant to loan money to someone who has a serious credit infringement on their credit history.

How long do they remain on my report?

Defaults remain on your credit history for five years from the date they are listed. Serious credit infringements remain on your credit history for seven years, unless they are paid off, after which they revert back to a default and remain for five years.

Commercial credit clearouts remain on your credit report for seven years, even if you pay off the debt. The fact that an amount has become overdue and then been paid becomes part of your credit history, regardless of whether it was a default or serious credit infringement.

How does a serious credit infringement get listed on my file?

A serious credit infringement can only be listed on your credit record after it has been listed as a default. To list a default, the creditor must send two written notices; the first stating that an amount is overdue, and the second warning stating that the creditor is going to report your debt to a credit reporting body. The debt must also be worth more than $150.

Once a debt has been listed as a default, the creditor must make multiple attempts to contact you over the next six months. If you are not contactable and no longer live at your last known address, then the creditor may report your debt to a credit reporting body.

A creditor can list a commercial credit clearouts immediately if you have left your last known address and not provided a new one.

How can I avoid a serious credit infringement or default?

To avoid a negative credit record, simply pay all debts and bills on time. There are circumstances in which you may not be able to meet all of your obligations or simply forget a bill. In these instances, communication is key. Talk to the creditor before a default occurs to discuss their financial hardship provisions.

Avoiding serious credit infringement is also about maintaining communication with creditors. Keeping your address up to date is a simple way of preventing a serious credit infringement from being recorded.

credit-score-banner

Picture: Shutterstock

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

2 Responses to The difference between defaults and serious credit infringements

    Default Gravatar
    sally | January 18, 2017

    my score is much worst than i thought,i dont have any bills i havent paid,but i am late paying sometimes could this be why??

      Staff
      Anndy | January 18, 2017

      Hi Sawatson,

      Thanks for your question.

      There are different factors that can affect your credit score. For more information on this, you can refer to our guide here.

      If you’d like to know the full details of your credit score, you can request a free credit report from Veda through this page.

      Cheers,
      Anndy

Ask a question
feedback