When you take on debt, whether that’s a loan, mortgage, mobile phone plan or credit card, you must make monthly repayments. Missing them could lead to a default, which is recorded on your credit file.
Defaults negatively impact your score, and your ability to get credit in the future – so they’re best dealt with swiftly. Here we explain what a default is, where they come from, how long they stay on your file and how to get them removed.
A default happens when you fail to make the monthly minimum payments on a debt. It means that the lender has decided to close your account because you owe them money and they don’t think you’ll get back on track.
Usually, the lender won’t consider a default unless you’ve missed several payments over a period of time. Debt charity Step Change says that three to six months is typical, however, this can depend on the individual provider’s terms.
Some lenders issue a default notice, to warn you that they’re about to close your account. At this point, you have at least two weeks to clear your debt. If you do, the default won’t be applied to your credit history. You can offer a payment plan, but the lender doesn’t have to agree.
If possible, clear the debt in the 14-day window after getting a default notice. If you’re struggling with problem debt, contact a charity such as StepChange or Citizens Advice for help.
Yes, a default usually has a negative impact on your credit file and will make the score go down. This can make it more difficult to get credit in the future.
If you get a default, it will sit on your credit file for six years after the date it was issued, even if you pay off the debt in full.
That doesn’t mean you should ignore the debt. Firstly, the lenders could sell it to a debt recovery company or take you to court, and secondly, your credit file will reflect that it hasn’t been paid. If you pay the default off, then it’s marked as ‘satisfied’ which is better for your credit rating.
A default will impact your ability to get credit in the future. For instance, you might find it harder to get a new mortgage or a credit card. Where lenders are prepared to offer you credit, they will typically do so at less favourable rates.
This is because when a lender looks at your file, they’re trying to understand what kind of borrower you are. They want to give money to people who can afford repayments and will pay on time. A default is a big red flag that you’ve missed multiple repayments in the past. It makes lenders nervous, so they’re less likely to offer you a loan, or will want higher interest to justify the risk.
There are specialist providers who offer credit to people with lower scores. However, these options often come with high interest and low limits.
You can’t have a default removed if it’s accurate. The most sensible thing you can do is pay it off, and work on improving your score in other ways. The longer ago the debt was satisfied, the better it looks to lenders. If you can show you’ve been a responsible borrower since the default, this will improve your score.
If the default is inaccurate, you can have it stricken from your file. This could be because the lender has got you mixed up with someone else, for instance. You could also have an erroneous default where you recognise the debt but never missed any payments. You should contact the lender and ask for a statement of account and check this against your bank statements.
If you want to get an inaccurate default removed, the first step is to check which credit reports it appears on. You should check Equifax, Experian and TransUnion as any of these could be showing the error. It might even appear on more than one report. Read more on how to check your credit score for free in our guide.
Once you’ve identified where the error is, follow these steps to have it removed:
Contact the credit reference agency to alert them to the error
They may ask for extra information about the error, provide them with this as far as you can
The CRA should then add a notice of correction to the file to alert lenders the information might be inaccurate
You may also be able to contact the lender in question to alert them to the issue
If the lender agrees, the default will be removed from your file
You should see your score improve when the default is removed
While you can’t have a default removed from your file if it is accurate, there are things you can do to mitigate the damage. Repaying all the debt is a good first step. This means it will show as satisfied, which looks better to future lenders.
Sometimes you can add an explanatory note to your file. This can be helpful if you missed payments due to circumstances beyond your control, for instance, if you were made redundant or were unwell.
You can also take steps to improve your score. This can be simple things like making sure you’re on the electoral roll, using a credit builder credit card and checking your information is correct. There are more complex steps too. Read our guide to improving credit ratings to find out more.
Don’t forget, the longer ago that the default was, the less impact it will have. After six years, it will vanish altogether.