How long does a default stay on your credit file?

What is a default?

A default is a notice from a lender that you have missed payments. Default notices are a legal procedure under the Consumer Credit Act 1974. Lenders must issue a default notice before they can take further steps, including:

• Terminating the agreement
• Demanding earlier payment of all outstanding debt
• Taking possession of assets from you (such as hiring bailiffs)
• Ending, restricting or delaying your right to anything covered by the agreement (such as use of a car or other hire-purchase item)
• Seek possession of assets used as security for the loan

You won’t usually be issued with a notice of default as soon as you miss a single payment. Lenders usually issue default notices when you miss payments over three to six months, but this depends on the creditor.

You could have missed payments for borrowed money from, for example, a credit card or a car finance agreement. You can also receive a default notice for missing payments and breaking a credit agreement for something like an energy or mobile phone contract.

How long does a default stay on your credit report?

If you have a default it will stay on your credit report for six years from the date it was issued. Even if you clear the debt owed, the default remains on your credit file for the full six years.

The lender may sell on your debt to a debt collector. If it does this, it needs to tell you and make this clear on your credit report.

After six years, the default is removed even if you have not cleared the debt. However, a lender could take more serious action against you, such as hiring a debt collection agency and seeking a County Court Judgment (CCJ) or repossessing any assets.

Will a default make my credit score go down?

A default will make your credit score go down. This can reduce your ability to take out credit in the future or get the best deals available.

Exactly how many points your credit score will drop will depend on a number of factors, including:

• Your credit score when you missed the first payment
• How many points have already been deducted because of the earlier missed payments
• Whether you have other late or missed payments
• The size of your debt
• The amount in default

The three main credit reference agencies (CRAs) in the UK, Experian, Equifax and TransUnion, calculate credit scores in different ways. These three CRAs are regulated by the Financial Conduct Authority (FCA). You can check your credit score – and your full credit history – with any or all of the main CRAs.

Can you get credit with a default?

You may be able to get credit with a default. However, Lenders will see you as a high risk and some won’t lend to you at all. Those that will lend to you will charge you more to borrow money than someone with a better credit score and no defaults.

There are specialist financial firms that will lend to people who have had defaults. The best way to check if you might be approved for credit is to use a free eligibility checker. It will tell you your chances of getting credit without impacting on your credit score.

Can I have a default removed from my credit file?

You can ask to have a default removed from your credit file if you can prove it was wrongly issued. If a default is correct, you can’t have it removed from your credit file. It will remain there for the six years and any lender will be able to see it.

If the default is correct but was caused by something like an injury, serious illness or you losing your job, you can add a note to your credit file to explain this. This is called a notice of correction (NOC). It must:

• Be no more than 200 words
• Be relevant and accurate
• Not be trivial, rude or libellous
• Not blame anyone
• Not name any other person or company

How to get a credit default removed

You may be able to get a credit default removed by raising a credit file notice of dispute. These are the steps to follow for the default removal process:

1. Look at the default on your credit report
2. Contact the credit reference agency and tell it why the default needs changing
3. The CRA will contact the lender and give it 28 days to check the default
4. A ‘notice of dispute’ will be added to your report. This will be visible to other lenders
5. The CRA will tell you the lender’s response and you can contact the lender directly too. If you still disagree the Financial Ombudsman Service may arbitrate
6. If the lender agrees the information is incorrect, it or the CRA will update your credit reference file to give this information and remove the default
7. If the lender fails to respond in 28 days, the CRA will remove the default from your file.
8. You should see an improvement in your credit score after the default is removed

Can I reduce the impact of a default?

You can reduce the impact of a default even if you can’t get it removed. The following will all help to reduce the default impact on future borrowing:

• Repay the debt owed if you can. The default will then be marked as ‘satisfied’ on your credit report.
• Speak to the Lender, to see if there are any options available.
• Contact the CRAs and ask them to add a notice of correction to a default with an explanation of why it happened, such as a long-term illness, accident or redundancy
• Wait it out – as time passes the impact of the default will reduce

Will a default affect my chances to borrow in the future?

Having a default will affect your chances to borrow in the future but it won’t last forever. A default will lower your credit score, which is a crucial tool for borrowing money. Lenders will look at your credit history when they are deciding whether to lend to you or not and how much interest to charge you.

Many lenders will look at your full credit report and be able to see:

• If a default has been marked
• If a notice of correction has been added, explaining the reasons for the default
• If you have repaid the money owed and satisfied the debt.

Once a default is removed, this will improve your score and lenders will no longer be able to see it, or even know that you once had a default.

What can I do to reduce the impact of a default on my credit score?

There are lots of things you can do to reduce the impact of a default on your credit score. While the default can’t be removed, you can work on boosting your credit score, which will rebalance some of the negative impact of the default.

You can’t improve your credit score overnight, but over time it will get better if you consistently carry out the following:

• Always make repayments on time – set up a direct debit to pay them if you think you will forget.
• Don’t use all of the credit available to you – aim to use less than 25%.
• Avoid taking cash out on a credit card.
• Don’t make multiple applications for credit in a short space of time. Instead use a free eligibility checker – this doesn’t impact your score.
• Use a credit repair product, such as a credit builder card (but only if you can clear it each month).
• Register on the electoral roll.

Summary – how long does a default stay on your credit file?

A default stays on your credit file for six years and while it may make a significant dent in your credit score, there are lots of ways you can reduce the impact.

If you think it’s an error, act quickly and get in contact with the credit reference agencies and your lender. If it’s correct, work on boosting your score in other ways and you should see an improvement to your score.

Also remember to check your credit score regularly to spot any inaccuracies. It’s free to check your score, and most CRAs also offer credit monitoring services for a fee too.