The short answer
Paying a default does not remove it. The lender must update the listing to show it has been paid, but the default stays on your file for five years from the date it was first listed.
Why paying still matters
Lenders look at more than whether a default exists. A paid default tells them you dealt with the debt. Many lenders, especially specialist lenders, treat a paid default much more favourably than an unpaid one, and its impact fades as it gets older.
When a paid default can be removed
A paid default can only be removed if it was listed incorrectly. For example, if the required notices were not sent, the amount was wrong, it was under $150, or it was not yours. The same checks apply as for any default. See our guide on how to remove a default.
Make sure the status is updated
After you pay, check your credit report a few weeks later. If it still shows as unpaid, ask the lender to update it. If they do not, you can request a correction from the credit reporting body.
Watch out for promises
Be wary of anyone who says they can remove a paid default just because it has been paid. If the listing is correct, the law says it stays.