Dealing with defaults on your credit report

A default can leave a blemish on your credit report, making it hard to borrow money. However, you can still polish up your profile while waiting for the default to be cleared. By taking swift and sensible action, you can reduce the negative impact of your default and improve how lenders see you and it is worth noting that the impact of a default decrease over time.

What is a default?

A default occurs if the lender decides to close your account because you’ve missed payments. This might happen to an account you have with a bank, mobile phone company or utility supplier (e.g. gas, electric and water).

A default can occur regardless of how much money you owe, whether it’s a few pounds or a few thousand. It usually happens if you’ve been missing payments over the course of three to six months, but this can vary depending on the lender’s terms. So, it’s important to keep track of when you are due to be charged and set money aside for it.

How long does a default stay on your credit file?

A default will stay on your credit file for six years from the date of default, regardless of whether you pay off the debt. But the good news is that once your default is removed, the lender won’t be able to re-register it, even if you still owe them money. Nevertheless, you should continue to meet any remaining payments as the lender could go on to register a CCJ against you.

Note that the lender may sell your debt to a debt collector (a company that specialises in getting debts repaid). However, the lender must make this obvious on your credit report, so it won’t look like you have two defaults. Also, the amount and date shouldn’t change, so you won’t need to pay more or wait longer for your default to be removed.

You can see if you have a default on your credit profile by checking your Experian Credit Report.

What is a default notice?

A default notice is a notification from a lender asking you to catch up with your payments or else have your account closed. It’s your chance to stop a default from happening. You should try and pay the amount you owe immediately to avoid a default.

Can I get credit, like a loan or mortgage, if I have a default?

A default negatively impacts your ability to borrow money. When you apply for credit, lenders check your credit information to decide if you’re likely to pay them back. A default looks like bad news to lenders, as it shows you’ve struggled to repay credit in the past. So, you may find it hard to get approved, particularly for mortgages since lenders must meet strict rules to ensure you can afford one.

However, it’s still possible to borrow money with a default on your record. If you are looking for credit you could consider options designed for people with bad credit history, which usually have high interest rates and low limits. But make sure you can afford the monthly repayments first.

You might like to compare mortgages across the UK market, and see your eligibility for personal loans. Remember, we’re a credit broker, not a lender^†.

Can employers see my default?

Most employers won’t know you have a default, since only organisations that share their own credit data can routinely access your credit information. Therefore, most employers will just check public data, such as County Court Judgments and bankruptcies. An exception might be if you apply for a job with a lender or credit reference agency. In this case, they may ask for your permission to run a full check as part of your job application, meaning they’ll see your defaults.

Can I remove or update a default on my credit file?

You can ask for an inaccurate default record to be updated or removed by raising a credit report dispute. Here’s how to do this:

1. Get your credit report to see the default entry
2. Get in touch to tell us how and why it should be changed
3. We’ll contact the lender and ask them to check the accuracy of the data they’ve given us. In the meantime, we’ll add a ‘Notice of Correction’ to your report
4. We’ll let you know the lender’s response. You can also contact the organisation directly yourself
5. If the lender realises their data was incorrect, your report will be updated to reflect this. If they think they were correct and you still disagree, we’ll help you understand your options

Note that we can’t change or remove a default on your report without the lender’s permission. However, we’ll do everything we can to help you sort out a dispute.

Can I reduce the negative impact of a default?

Once a default is recorded on your credit profile, you can’t have it removed before the six years are up (unless it’s an error). However, there are several things that can reduce its negative impact:

• Repayment. Try and 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
• Explanation. Consider asking us to add a note to your credit report to help lenders understand why you got into debt (e.g. redundancy or long-term illness)
• Time. As your default ages, it may become less important to lenders. So, after a few years, you may find it easier to get approved for credit again

You can also take steps to improve your credit score, which can help balance out the negative impact of a default. In the long-term, you get more control over your finances with a paid CreditExpert subscription.

Getting help

If you’re worried about money, you’re not alone. There are many debt charities and companies that offer free independent advice for everyone. They can advise you, and could act on your behalf to help with any debts you might have.

MoneyHelper is a free, government-backed money guidance service – their site includes a handy Debt Advice Locator tool tool that can help you find confidential debt advice.

Other places to turn include: National Debtline, StepChange Debt Charity, PayPlan, AdviceUK.