diff --git a/setup.c b/setup.c
index 3d2b3e745b..03a61bd06a 100644
--- a/setup.c
+++ b/setup.c
@@ -835,9 +835,12 @@ static void init_repository_format(struct repository_format *format)
 int read_repository_format(struct repository_format *format, const char *path)
 {
 	clear_repository_format(format);
+	format->hash_algo = GIT_HASH_SHA1_LEGACY;
 	git_config_from_file(check_repo_format, path, format);
-	if (format->version == -1)
+	if (format->version == -1) {
 		clear_repository_format(format);
+		format->hash_algo = GIT_HASH_SHA1_LEGACY;
+	}
 	return format->version;
 }
 
diff --git a/setup.h b/setup.h
index 18dc3b7368..8522fa8575 100644
--- a/setup.h
+++ b/setup.h
@@ -149,7 +149,7 @@ struct repository_format {
 { \
 	.version = -1, \
 	.is_bare = -1, \
-	.hash_algo = GIT_HASH_SHA1, \
+	.hash_algo = GIT_HASH_DEFAULT, \
 	.ref_storage_format = REF_STORAGE_FORMAT_FILES, \
 	.unknown_extensions = STRING_LIST_INIT_DUP, \
 	.v1_only_extensions = STRING_LIST_INIT_DUP, \