Cadmium telluride is a favorable material for X-ray detection as it has an outstanding characteristic for room temperature operation. It is a high-Z material with excellent photon radiation absorption properties. However, CdTe single crystals may include a large number of extended crystallographic defects, such as grain boundaries, twins, and tellurium (Te) inclusions, which can have an impact on detector performance. A Technology Computer Aided Design (TCAD) local defect model has been developed to investigate the effects of local defects on charge collection efficiency (CCE). We studied a 1 mm thick Schottky-type CdTe radiation detector with transient-current technique by using a red laser at room temperature. By raster scanning the detector surface we were able to study signal shaping within the bulk, and to locate surface defects by observing their impact on the CCE. In this paper we present our TCAD model with localized defect, and compare the simulation results to TCT measurements. In the model an inclusion with a diameter of 10 μm was assumed. The center of the defect was positioned at 6 μm distance from the surface. We show that the defect has a notable effect on current transients, which in turn affect the CCE of the CdTe detector. The simulated charge collection at the position of the defect decreases by 80 % in comparison to the defect-free case. The simulations show that the defects give a characteristic shape to TCT signal. This can further be used to detect defects in CdTe detectors and to estimate the overall defect density in the material.