A default can stop you getting credit

A default on your credit file can prevent you from borrowing money. A default occurs when you have missed too many payments or broken the terms of your credit agreement. A lender may then decide to close your account.

A default is recorded on your credit file and will impact your credit score. This will most likely result in an automatic decline from lenders; preventing you from getting credit in the future.

If you miss one payment, creditors will consider this ‘early delinquency’ and this would not result in an immediate default. Only when you miss 6 consecutive payments will a lender issue a default notice.  

What is a default notice?

A default is not issued immediately following six consecutive missed payments; instead, you will receive a warning.

Typically, lenders will send you a ‘notice of default’ letter after three to six months of missed or under payments (dependant on the lender’s terms and conditions). This is to give you a chance to catch up with payments and prevent a default. You will have two weeks to resolve the issue. If you cannot pay in this time your account will default.

Additionally, if a lender thinks the relationship with a borrower has broken down (e.g. they don’t answer letters or phone calls), they may register a default.

How long will a default remain on your credit file?

Importantly, a default will remain on a credit file for six years, even if you repay the debt owed within that time.

Having an account in default will negatively impact your credit score and prevent you from getting credit in the future. This is because lenders will see you have struggled to meet previous credit agreements and make repayments. They will consider you too high a risk for them to borrow money too.

This can make it difficult to get:

  • Future loans
  • Credit cards
  • Mortgages
  • Certain bank accounts

However, if you are issued a default, you can still make positive steps towards improving your credit file whilst waiting for the default to clear.

How to improve your credit file with a default

By taking swift action to improve other aspects of your credit profile, you can reduce the negative impact of your default and improve how lenders see you. This includes:

  • Pay off what you owe as soon as possible. Once you’ve achieved this, the default will be marked as ‘satisfied’ on your credit report, which looks better to lenders
  • Time. Although a default remains on your credit file for six years, as time goes on, it may become less important to lenders. After a few years, you may find it easier to get approved for credit again
  • Check other aspects of your credit report for any mistakes
  • Register on the electoral roll
  • Consider speaking to a credit reference agency to explain why the default occurred

There are some instances when a default can be removed.

How to get a default removed

A default can be removed from your credit file if enough time has passed or an error has occurred.

Defaults will only stay on your credit file for six years from the date it was added. In line with Statute Barred Debt if a creditor waits too long to recover the debt, it will become ‘unenforceable.’ Once six years have passed, the default will be automatically deleted from your credit file.

Errors can occur, which is why it is important to check your credit file. Errors can range from the lender did not contact you, mistaken identity, or administration errors. If you want to contest a default, you should contact the lender.

Once your default is removed from your account, the lender will not be able to re-register it.

If you are experiencing financial difficulty you should contact your lender as soon as possible. It is best to be honest with your lender. They may be able to agree to a repayment plan that suits you.

Additionally you can contact free debt advice services such as StepChange, National Debtline or Citizen’s Advice for further support.

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