How to get a default removed from your credit file

  • How to get a default removed from your credit file
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Overview:

This article will cover everything you need to know about defaults, including what they are, how they affect your credit history, how to get them removed from your credit file, and how to avoid them altogether.

When you enter into a credit agreement, such as a personal loan or mortgage, it’s crucial to make repayments ‘as they’re due’ (in full and on time) to prevent your lender from taking legal action against you.

Failure to make repayments as agreed can lead to you breaking the terms of your credit agreement and a default being added to your credit file. This is when the lender closes your account due to continuous non-payment.

This article will cover everything you need to know about defaults, including what they are, how they affect your credit history, how to get them removed from your credit file, and how to avoid them altogether.

What is a default?

Before explaining how to get a default removed from your credit file, it’s important to understand exactly what a default is.

Put simply, a default is a negative marker that is added to your credit file when a lender (e.g. utility provider, bank, or mobile phone company) closes your account because you’ve missed too many payments.

Once a default has been recorded on your credit file, other lenders will be able to see you’ve missed repayments on a former credit agreement and use this information to decide whether you should be allowed to borrow more money.

Having a default on your credit file won’t automatically prevent you from getting a loan or mortgage, but it can make it difficult to get approved.

There is no minimum amount of debt or number of missed payments required before you can be issued with a default, meaning it can happen whether you owe £10 or £10,000. However, a default is usually only considered if you’ve missed several payments over the course of three to six months and your lender has failed to come to an agreement with you over the money owed.

How is a default issued?

Before a default can be added to your credit file, your creditor must serve you with a ‘default notice’ or ‘notice of default’. This is a formal letter letting you know that you’re behind on your repayments and your account is at risk of being closed if you don’t make up for the money owed.

The default notice will tell you how many payments you have missed and how long you have to make up for the missed payments if you want to avoid a default (usually 14 days). Often, a default notice will be your final chance to stop a default from being issued.

Making up for the missed payments within 14 days will put a stop to any further action being taken. However, if you’re unable to repay your balance in full before the grace period expires, a default will be added to your credit report.

Even if you can’t repay the debt in full, your creditor may agree to let you repay your balance in instalments, although this is rare. Similarly, you must let your creditor know as soon as possible if you only admit to owing a portion of the debt as this is a problem that can take more than 14 days to resolve.

Which debts do defaults apply to?

Defaults apply to debts covered by the Consumer Credit Act (1974), including personal loans, payday loans, credit cards, store cards, catalogues, and hire purchase agreements. This means you can’t receive a default for mortgages, charge cards, debts owed to family or friends, household bills, and some types of business debt.

However, this is just a selection of the debts defaults apply to and, in some cases, debts can be regulated or unregulated depending on the date the credit agreement was taken out or the amount borrowed. For example, debts over £25,000 have only been regulated by the Consumer Credit Act (1974) since 2008.

How long does a default stay on my credit file?

Like most types of financial information, a default will stay on your credit file for a total of six years from the date your account officially defaulted – even if you repay the debt in full. But the good news is, your credit score will gradually improve over time as the default gets older. 

However, while it can be tempting to simply ignore the debt for six years until the default is automatically removed, this isn’t recommended.

During these six years, your creditor can still sell the debt to a third party, such as a debt collector, or start court proceedings against you, and your credit file will show that it hasn’t been paid.

Paying the debt during the six years won’t get the default removed from your credit file, but it will be marked as ‘satisfied’, which will improve your credit rating and show lenders that the debt has been repaid. 

Because credit reference agencies are more interested in your recent credit utilisation, a default issued in the last few years is more likely to influence your credit rating than a default that’s five years old, for example. 

How does a default affect my credit history?

Receiving a default notice from a lender can be worrying, but it’s important to remember that a default notice won’t be added to your credit record, only a default. This means that, if you have the means to repay the debt within 14 days, your credit history should remain unaffected.

However, ignoring a default notice will lead to a default being added to your credit record and this will negatively affect your credit score.

This information will also be visible to anyone who views your credit file from any of the main credit reference agencies, such as banks, mortgage lenders, mobile phone companies, and some employers, and can make it difficult to get approved for further credit.

Having a default on your credit file can also affect your chances of getting a job or keeping your current job, but this is rare and usually only the case if you work in certain industries, such as financial or legal services. 

What happens if I ignore a default?

When you receive a default notice, it’s important not to ignore it under any circumstances – even if you don’t admit to owing the full amount or the debt is just for a small amount.

The first thing your creditor is likely to do when you ignore a default is hire a debt collector or debt collection agency with more time and resources to chase you for payment of the debt.

They can visit you and ask you to make up for the missed payments, but they don’t have the same powers as bailiffs and therefore can’t force entry into your home.

They may also take you to court and apply for a County Court Judgment (CCJ) against you, which is a type of court order instructing you to repay the debt according to terms handed down by the court (the judge will order you to pay the debt in full or in instalments).

Both of these actions will cause further damage to your credit score and make it difficult to access credit for several years. This will cause problems if you want to apply for a loan, mortgage, bank account, or even a phone contract.

How to get a default removed from your credit file

There are certain situations in which you may be able to get a default removed from your credit file, such as:

“I have a default for a debt that isn’t mine”

Having a default added to your credit file for a debt that isn’t yours can be frustrating, but it’s important to remain calm and try to resolve the situation sooner rather than later.

Firstly, if you’re confident the defaulted debt isn’t yours, you must contact the lender with proof and ask them to remove the default from your credit record as soon as possible. This can prevent your credit score from being affected and put a stop to further legal action being taken against you.

“I shouldn’t have a default because I didn’t miss a payment”

Defaults should only ever be issued when you’re in arrears, so it can be surprising to receive a default when you’re certain you didn’t miss a payment.

When this happens, you must ask your lender for a ‘statement of account’, which is a document containing information about the debt, including your outstanding balance.

By comparing the statement of account against your bank statements, you should be able to compare the payments you made against the payments received by the lender and spot where the problem arose.

“I made payments in full and on time but the lender stopped receiving them”

Sometimes, a breakdown in communication or a technological glitch can mean your lender isn’t receiving your payments as intended.

For example, you may just assume you’re making payments towards the debt because the money is being sent from your end. However, if the money isn’t being received by the lender and you’re not being notified of it, you could be in arrears without even knowing it.

These situations can be tricky to prove but as long as you can provide evidence that shows you didn’t cancel any recurring payments and the error doesn’t lie with you, you should be able to get the default removed.

“I was not properly informed that I had missed payments”

Though lenders will always try to give you sufficient notice of a default before it is issued, this isn’t always the case.

Whether they failed to explain extra charges or sent the default notice to an old address, this can leave you feeling shocked and unprepared.

However, because both of these situations are the lender’s fault, you are within your right to ask them to remove the default from your credit file – especially if you have an otherwise clean credit history and don’t have a history of problem debt.

“I have an inaccurate or wrong default on my credit file”

Noticing a default has been added to your credit file in error can be unnerving, but you do have options. For example, you can get in touch with the credit reference agency directly and raise a ‘credit report dispute’.

They will then contact the lender and ask them to check the accuracy of the information provided and add a ‘notice of correction’ to your credit file in the meantime.

Remember, credit reference agencies can’t change or remove a default from your credit file without the lender’s permission and can only do so once your lender has admitted to the mistake and provided proof showing that the default was issued in error.

How can I avoid getting a default?

Often, it’s easier to avoid getting a default than it is to try to get it removed from your credit file. There are several things you can do to avoid getting a default, such as:

Cut back on unnecessary expenses

The best way to avoid default is to keep an eye on your spending and cut back on unnecessary expenses like dining out, entertainment, and subscriptions. By freeing up more of your disposable income, you can ensure you’re only spending within your means and putting more money towards debt repayment.

Communicate with your lender

Reaching out to your lender might not be the first thing that springs to mind when you’re struggling financially, but it will keep them informed of your financial situation and may even allow you to negotiate an alternative payment plan, interest rate, or payment break until you get back on your feet.

Similarly, you must ensure you’re keeping on top of all phone calls, letters, and emails received to prevent a default notice from going unnoticed.

Consider a debt solution

Knowing you won’t be able to meet your financial obligations can be daunting, but a debt solution can allow you to consolidate your debt into a single monthly payment that you can comfortably afford and, in some cases, even write off your remaining balance.

From an Individual Voluntary Arrangement (IVA) to a Debt Management Plan (DMP), the right debt solution for you depends on your financial situation.

Seek expert help

The key to avoiding a default is to seek expert help for your debts before they escalate. There are various debt professionals available to provide tailored advice, talk you through your money worries, and recommend the right debt solution for you.

Opening up to a stranger about your financial situation isn’t easy, but it can help you improve your finances and, more importantly, avoid a default.

Repay what you owe

Though not always an option, repaying what you owe after a default notice has been sent can allow you to settle your debt and prevent a default from being added to your credit file.

This will also help you avoid unnecessary damage to your credit history and move on from your debts for a healthier financial future. 

Conclusion

Having a default on your credit file can have serious consequences for your finances and make it difficult to access most forms of credit for several years. However, if you can prove that the default shouldn’t have been added to your credit file in the first place, you may be able to get it removed.

Typically, defaults are only added after a minimum of three months’ worth of missed payments. Receiving a default when you’ve only missed one payment, were not properly informed that you had missed payments, or for a debt that isn’t yours shouldn’t happen, and you can ask for it to be removed.

There are various things you can do to avoid getting a default in the first place, such as communicating with your lender, considering a debt solution, and seeking expert help. The sooner you take action to address your debts, the sooner you can improve your financial situation.

Key Takeaways

A default is a negative marker that is added to your credit record for six years as a consequence of missing payments over the course of three to six months
Having a default on your credit file can make it difficult to borrow money and you'll likely be subject to higher interest rates to lower the level of risk to the lender
Before a default is added to your credit file, you'll receive a default notice giving you 14 days to make up for the missed payments
Ignoring a default can lead to your lender hiring debt collectors to collect the money on their behalf or taking court action against you in the form of a CCJ
Taking steps to avoid a default in the first place is better than trying to get a default removed after it's been added to your credit record
Maxine McCreadie

Maxine McCreadie

Author/Debt Expert

Maxine McCreadie, prominent personal finance writer featured in Vogue and Yahoo News, delivers practical guidance, simplifying money management and championing financial literacy.

How we reviewed this article:

HISTORY

Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

February 28 2024

Written by
Maxine McCreadie

Edited by
Ben McCormack

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