A default is a marker on your credit file that signifies that you have breached the terms of an agreement you have with a lender. It’s there to give other potential interested parties such as lenders, landlords or mobile phone providers an insight into your ability to manage your finances.
When is a default applied?
Usually it’s applied when you have spent a prolonged period of time behind on your payments or you’ve missed a set number of payments. Typically creditors will add a default to your credit file when you are 3 - 6 months behind on payments. It’s normally lenders who add defaults to your credit file, but other organisations such as utility companies can do too.
What effect does a default have on my credit score?
A default is very likely to have a negative impact on your overall credit score. Likewise, many lenders will refuse to lend to anyone who has had a recent default on their credit file. Therefore, a default could impact things like your ability to get a mortgage or it might mean you pay extra for any borrowing you take out because you are deemed a higher risk for non-payment.
How long does a default marker stay on my credit file for?
A marker will stay on your credit file for 6 years from the date of the default.
Can I reduce the negative impact of a default?
You can reduce the negative impact of a default marker on your credit score by paying off the debt. Once you’ve paid it off the default will be marked as “satisfied”. This also means that many lenders who previously would have automatically rejected you for credit might not do so anymore (for example, they might have a policy of not lending to someone with a live default in the last X number of years).
You can’t have a default removed entirely unless it was incorrectly applied. If it was incorrectly applied, you should complain to the organisation that registered it. If it was a financial institution, you’ll be able to complain to the Financial Ombudsman Service if you are not happy with the financial institution's response. You can also go directly to the credit reference agency it was registered with and raise a dispute. However, please remember that some organisations work with numerous credit reference agencies so you may need to raise a dispute with more than one.
Do you have a debt to clear?
If we have contacted you about a debt, you can start building back your credit score by exploring flexible repayment plans here. Just enter your reference code found in any communication that we have sent you.
