Default

What is a default?

A default is a negative payment marker that arises as a result of unpaid arrears on your credit file. When a default is issued it usually means that the lender no longer sees the borrower as a customer, but instead sees them as a debtor.

Defaults can arise in two ways: First, for regulated credit agreements, a default may be the result of failing to respond to a Notice of Default issued under section 87 the Consumer Credit Act 1974 after failing to make a repayment.

After receiving a default notice, the debtor has 14 days to pay the amount owed, either in one lump sum or instalments, otherwise a Default will be registered on their credit file.

In the second instance, for credit agreements that are not regulated under the act, (e.g. mortgages) a default on a credit file simply reflects the fact that the lender considers the relationship between itself and a borrower to have broken down.


Q: How does it affect my credit rating?

A: Defaulted accounts are regarded as serious arrears for the entirety of the time they remain on your file.

Even if a default has been satisfied (paid) before the six year period is over, it will still appear as an entry on your file for the remainder of that time, though some lenders will see this more favourably than a default that has not been satisfied.

Many lenders will choose not to offer credit to someone that has a default on their credit file, so the potential impact can be severe.

Q: How can I remove a default from my file?

A: If a default on your credit file is accurate, you are unlikely to get a lender or Credit Reference Agency to remove it. That is because it is their legal duty to ensure all the information appearing on your credit report is accurate.

If a default is accurately reported on your credit file, it will remain there for six years, after which time it will be automatically removed.

Q: How long does a default last?

A: Defaults will remain on your credit report for six years from the date of being issued. After this time has passed, it is normal for the default to continue to appear on a credit report for a further month, as Credit Reference Agencies only update your file on a monthly basis.

If a lender has not issued a CCJ in the six years that the default was active, the debt becomes ‘statue barred’, which means they cannot pursue the debt through the courts. However, if you still owe them an outstanding amount after this time, the lender can still attempt to reclaim the debt through other means, such as using debt collectors.

Q: Can I get a mortgage with a default on my credit file?

A: Defaults are one of the most severe pieces of negative information that can appear on your credit report. For that reason, you may struggle to get offered a mortgage from a high street lender while one is appearing on your credit file.

Some lenders may offer mortgages to people with low credit scores or troubled financial histories, but this is likely to be at a much higher APR, costing more overall. As with a credit card, the better your credit history, the more likely you are to be accepted for better deals.

Q: How do I check for a default?

A: If you have had a default at any time in the past six years, it will appear on your credit report, regardless of whether it has been satisfied or not. checkmyfile’s Multi-Agency credit report will show you which lenders are reporting a default and how much time is left before it will drop off.

If you haven’t already, you can try checkmyfile FREE for 30 days , then for just £14.99 a month afterwards, which you can cancel online at any time.

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