What is a default on a credit file?
If you get a default on your credit file, it means that a lender has closed the account you have with them due to missed payments. You could get a default for missed loan or credit payments, or if you fail to pay your mobile phone or your household utility bills.
Missing one payment won’t normally lead automatically to a default, although ultimately it depends on the lender’s terms. But if you consistently miss payments, typically over the course of three to six months, the lender may cancel your contract, causing your account to default.
It doesn’t matter how much money you owe. You can get a default on your credit file for missing payments of any size, from a few pounds to a few thousand. What matters is that you have broken the terms of your credit agreement.
How do I know if I have a default on my credit file?
If you’re not sure if you have a default on your credit file, you can check your credit report for free from each of the three main CRAs: Experian, Equifax and Transunion.
What is a default notice?
If your credit agreement is regulated under the UK Consumer Credit Act of 1974 (CCA 1974) then your lender must send you a notice of default at least 14 days before they register a default with any credit reference agencies (CRAs).
This default notice should be a formal letter sent to your registered address. It should detail:
How much you owe
How you can pay
The deadline to pay the full amount and prevent a default.
Debts that are usually covered by the CCA 1974:
Credit cards
Store cards and store finance
Personal loans
Payday loans
Hire purchase agreements.
If you have another type of credit agreement that isn’t covered by the CCA 1974, the lender is not legally required to send you a notice of default.
Debts that are typically excluded by the CCA 1974:
Mortgages
Household bills, for utilities like gas, water and electricity
Buy now, pay later services such as your mobile phone or broadband plan
Debts to local or central government for things like tax payments or benefits overpayments
Debts to unlicensed lenders, family or friends
Charge cards
Some credit union loans.
How long does a default stay on your credit file?
A default stays on your credit file for six years from the date the account was closed. And it stays on your credit report for the full six years even if you later pay off the debt.
That doesn’t mean that you should ignore the debt if you do default. If you do, the lender could hire a debt collection agency to try and get the money from you. And they could apply for a County Court Judgement against you, which could further harm your credit score.
After six years, a default on your credit file should be automatically removed. It shouldn’t have any impact on your credit score after this time.
What happens if you have a default on your credit file?
Getting a default on your credit file can impact your credit score. It could be a red flag for future lenders, who may consider you a higher risk of not paying them back.
A default could affect your chances of getting a credit card, loan, or other credit agreement in future. Or it could mean you’re charged higher interest rates to borrow.
How serious is a credit default?
Although a default is visible on your credit file for six years, the negative impact it has on your credit rating does reduce over time. So, as time goes by, you’re likely to see more credit options become available to you.
The seriousness of the default could also depend on the size of the debt you defaulted on, and whether you subsequently paid it off. And it’s likely to be viewed as more serious if defaulting on your credit agreements becomes a pattern rather than a one-off.
Can you get a mortgage with a default on your credit file?
Yes, it’s possible to find a mortgage with a default on your credit file, but you may find you have fewer options. And you may face higher interest rates on your mortgage.
Mortgage lenders tend to have strict lending criteria, because of the size of the loan involved. They may consider factors like the size of the default, when it happened and the type of agreement you defaulted on when making their decision.
You can compare mortgages with us to see what rates and terms you could be offered.
Can I get a loan with a default on my credit file?
Yes, you may be able to find a loan with a default on your credit file, but again you’ll likely have more limited options. Lenders might be reluctant to lend to you if you have defaulted on a loan in the past, so you could face higher interest rates and lower loan limits.
Lenders may consider you more suitable for a loan if the default was in the past and you can prove that your financial circumstances have changed.
You can compare personal loans with us to see what you could be eligible for. Our loans comparison is based on a soft check of your credit history, so it won’t affect you credit score.
Can I get car finance with default on my credit file?
Yes, you can still find car finance with a default on your credit file, but if your credit is bad as a result, you may need to look for a specialist lender.
You can compare car finance options with us to see what may be available to you.
As with loans, mortgages and other types of credit, a default can be off-putting to lenders but it’s not the whole picture. There are steps you can take to lessen the impact of a default and improve your overall credit rating.
Can I remove a default on my credit file?
Sometimes a default could end up on your credit file in error. If the default on your credit file is a mistake or inaccurate you can contact the CRA and ask them to remove it.
Explain why you think the default should be removed. They can then get in touch with the lender who closed the account to check. In the meantime, they can put a ‘notice of correction’ on your credit file to say that the default is being disputed.
If the lender agrees that it was a mistake, the default will be removed. Otherwise, the default will remain. In this case, if you believe the default is unfair, you may need to dispute it with the lender directly and provide proof to back up your case.
You may be able to remove a default from your credit file if:
It’s a case of mistaken identity
You didn’t miss payments
Technical issues meant that the payment wasn’t received
You didn’t receive a notice of default (for a regulated debt).
How to fix a default on your credit file
If the default on your credit file is not a mistake, then you won’t be able to ‘fix’ it. But there are steps you can take to reduce the negative impact of a default on your credit score.
Pay off the debt
Once you’ve paid off what you owe, the default will be marked as ‘satisfied’ on your credit file. Although it won’t remove the default, it could help ease the concerns of future lenders. It will also prevent you being referred to a debt collection agency, or court.
Explain the circumstances
You could ask a CRA to add a note to your credit file to explain why you defaulted on a debt. For example, if you were made redundant or fell ill and were unable to keep up with payments.
This could show lenders that you didn’t intentionally behave irresponsibly with credit, but unexpected circumstances got you out of your depth.
Get your finances back on track
The further back a default is on your credit file, the less impact it may have on your ability to get credit with other lenders. And that could be especially true if you can prove that it was a blip, rather than a habit. Take steps to get your finances under control, avoid missing any more payments and let time do its magic.
How to improve your credit score in other ways
Taking steps to improve your credit score could also mitigate the negative impact of a default on your credit file. For example, you could:
Avoid missing payments. Set up direct debits to make sure your payments are made in full and on time.
Register to vote. If you’re on the electoral roll, lenders can easily check who you are and where you live and that can score you some easy points.
Don’t max out your available credit. Lenders normally like to see a low credit utilisation rate – that’s the percentage of your credit limit that you’re currently using.
Consider a credit builder card. If you’ve little to no credit history, managing a credit builder card responsibly could help build your score.
Get more tips on how to build your credit score.