A default on your credit file can feel like a heavy burden, but it’s not permanent. Defaults, along with any negative credit information, will be wiped from your credit report after six years.
Financial difficulties can happen to anyone, and the pressure of managing repayments can feel overwhelming. But understanding how defaulting affects your credit score and what steps you can take might help ease some of that strain.
In this blog, we’ll break down how a default impacts your credit score and the steps you can take if you’re facing one.
Simply put, defaulting means you haven’t met your repayments on a credit account. As a result, the lender can take action to collect the debt and will cancel the credit agreement. This can make borrowing in the future more challenging as lenders may see you as a risky borrower.
While situations vary, you usually receive a default notice after 3 to 6 missed payments.
Before your account defaults, you should be sent a default notice. This formal letter warns you that your account is about to default because you're behind on payments. It should also explain the next steps.
You’ll usually have 14 days to make up the missed payments before the lender either passes the debt to a collection agency or begins legal action.
Your credit score can take a significant hit if you default on a credit agreement. For example, a default can lower your Experian credit score by up to 350 points, potentially turning an excellent score into a poor one.
It’s also worth noting that the impact of a default can vary depending on the credit reference agency. For example, a default could lower your Equifax or TransUnion score differently. Be sure to check your credit report across all agencies to get the full picture.
If the default results in further action like a county court judgment (CCJ), you could lose an additional 250 points on top of the initial damage. This makes it harder for lenders to trust your ability to repay credit.
While some lenders may consider your application, many will be hesitant to lend if you have a recent default on your record. However, some lenders specialise in offering credit to people with poor credit histories, although they tend to charge higher interest rates.
Recent data from the FCA (Financial Conduct Authority) indicates that over 5.6 million UK adults are currently struggling with loan repayments. If you're one of them, it’s crucial to seek support early to minimise further impact on your credit profile.
Receiving a default notice can be overwhelming, but there are a number of things you can do to help:
Ensure all personal details are accurate to confirm the debt is yours and not a case of identity fraud. Double-check the amount of debt listed.
The sooner you reach out to your lender, the better. Whether you’re settling your balance within the 14 days or disputing the default, you’ll need to get in touch as soon as possible. Ignoring the default could lead to court action and a CCJ - which will make the situation worse.
Defaults remain on your credit report for six years, but lenders will often give more weight to recent activity. If you manage your credit responsibly after defaulting, your score can gradually improve. Consider using tools like a credit builder card to start rebuilding your score over time.
If you’re struggling to manage your debt, reach out for free advice from charities like StepChange or Citizens Advice. They can help you explore your options, including debt management plans or other solutions to avoid court action.
If you believe the default was placed on your account incorrectly, you have the right to dispute it. Contact the lender first, and if the issue isn’t resolved, you can raise the dispute with the relevant credit reference agency. They’ll investigate and potentially remove it if the information is found to be wrong.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
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