A Cooling Off Period is time allowed under law to enable a consumer to cancel an agreement without incurring any penalty. In consumer credit, the Cooling Off Period permitted by the Consumer Credit Act 1974 as part of your Right to Withdraw is 14 days.

Previously, the 14-day period only applied to forms of credit taken out in person at the business premises (e.g. at a bank or store). Credit taken out online, by phone, or mail order was restricted to a 7-day Cooling Off Period. Nowadays, thanks to the rise in popularity of 'Distance Selling', 14 days is used as a blanket period for all forms of borrowing.

If you are entitled to cancel a credit agreement, you must be sent a cancellation notice within the Cooling Off Period explaining that you have the right to cancel the agreement. A cancellation form will be enclosed with the notice and you can use this (or write a letter) to cancel the agreement. Should you decide to cancel, the cancellation must be sent to the lender within five days of receiving the notice, preferably by recorded delivery. A telephone call will not normally be sufficient.

It`s worth noting that if the trader has failed to provide you with the required information about your right to cancel, then the Cooling Off Period will be accordingly longer. You may require legal advice on this issue. Always check the terms and conditions of the contract.

Will a cancelled credit agreement appear on my Credit Report?

It is possible for a new credit account to show on your Credit Report, albeit temporarily, even if it is cancelled within the Cooling Off Period. Much will depend on timings and when information is passed between the lender and the Credit Reference Agency.

The easiest way to check whether an account is showing is to check your Credit Report for yourself. checkmyfile makes it easy to see everything there is to see, by bringing together data from Equifax, Experian and TransUnion in the same easy-to-understand report. It’s free for 30 days, then £14.99 a month. You can cancel online at any time, without fuss.

Does the Cooling Off Period apply to cars, mortgages and other big purchases?

Rarely. If you change your mind when in the house buying process, you’ll need to withdraw as early as possible. When buying a car, if you’ve paid a deposit, it is taken as a sign that you have committed to buy the car and breaking the agreement will lose you the cost of the deposit.