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13/09/2022

How To Get A Default Removed From Your Credit File

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Each year, millions of people miss payments on credit cards, personal loans, mortgages, payday loans, and other kinds of credit.

If these missed payments aren't caught up with quickly, they can result in a 'default' - which is recorded on your credit file.

 

Each year, millions of people miss payments on credit cards, personal loans, mortgages, payday loans, and other kinds of credit.

If these missed payments aren’t caught up with quickly, they can result in a ‘default’ – which is recorded on your credit file.

In this guide, we’ll take a straight-talking look at defaults, including:

  • What a default is
  • How a default affects your credit report
  • How mistakes happen with defaults
  • How to get a default removed from your credit file

What is a default?

Before we explore removing a default from your credit history, it’s useful to understand exactly what it is we’re talking about.

‘Default’ is the word used to describe a missed payment that hasn’t been caught up with. However, you don’t immediately get a default as soon as a payment is missed.

Most lenders will attempt to take your payment on the day your agreed date. If the money isn’t there (or you’ve cancelled the Direct Debit or standing order), the lender will usually try to take the payment again 2-3 days later.

If debt is regulated by the Consumer Credit Act (as most debts are) and the payment isn’t made for a second time, that’s when you’ll get a default notice. This is a letter that explains that you’ve missed a payment (or made an underpayment) on a debt that you owe.

A default notice usually gives you 14 days to get your account up to date. If you don’t make payment in this time, they will register a default with the credit reference agency they use.

Since a lot of information is shared between credit reference agencies, this will usually mean the default eventually shows with each agency.

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Breaking your credit agreement

People or companies you borrow money from will usually state that you’re in ‘breach of your credit agreement’ if you default on a payment.

This means you’ve broken your side of the agreement by not making payment towards the money owed.

When this happens, lots of lenders will tell you that you then must pay back your debt in full. This can be quite daunting – especially if you owe a lot. Try not to worry though, it’s very rare for a lender to insist that this full payment is made – most will simply want you to get caught up, even if that means adjusting the amount you pay going forwards.

What happens if you don’t pay a default?

At first, the creditor that you owe will be keen for you to just catch up with what you owe, even if the default has been registered with credit reference agencies.

However, if you can’t or won’t pay – or you just ignore the lender – they will start further action to get back what you owe. This will usually mean they cancel any further credit you might have.

After this, they will often get a debt collection agency to chase you for repayment. The debt will often be passed to them in full and you will have to make your own arrangements with them to pay it back.

Of course, both the debt collector or the original company you owe can repossess items that you’ve bought on hire purchase-style agreements. This often happens with financed cars or large electrical goods.

Whether or not items are repossessed, there’s also still the possibility that you’ll be taken to court so a judge can order you to pay back missing payments or the overall amount. Court action will usually end with a County Court Judgment (CCJ) being issued against you.

If you still refuse to pay after a CCJ has been issued, money can be recovered from your wages or benefits without your consent – or bailiffs could sent to seize things you own.

How does a default affect your credit rating?

Don’t panic if you’ve just missed a payment or received a default notice. Nothing is immediately recorded on your credit file.

However, if you don’t catch up with what you owe before the notice becomes an actual default, then the account default is recorded with a credit reference agency.

Since your credit history and credit score are closely linked, you’ll often find that a default makes your credit score go down.

This default will be visible to anyone who looks at your credit history – meaning lenders, insurers, phone contract providers, letting agents or landlords, and even some employers may get to see it. This can affect your chances of being offered credit. In some professions, it can even affect your chances of getting a job – although this isn’t common.

How long does a default stay on your credit file?

A default is recorded on your credit file for six years. This applies even if you’ve paid it quickly afterwards.

After six years, the default on your credit file will disappear. Although lenders will still be able to see during this time, it will become less important to their decision the older it gets.

Can defaults be removed from your credit history?

Now we’ve covered how defaults work and how they can impact any credit check that’s carried out against your name, it’s useful to understand some circumstances where defaults can (and should) be removed from your credit file.

Some defaults appear because of an error. In other cases, defaults are sometimes recorded late. Let’s take a look at each in detail:

Credit report errors

Errors can occur on your credit file. For instance, if a creditor has failed to collect a payment despite it being set up, they could go down the route of registering a default. If this is the case, the default can be removed. Also, if you made payment in full but the default was still registered, this is likely to be a mistake.

Other credit report errors could include:

  • Cases of mistaken identity
  • Duplicate defaults being added
  • You were in less than three months of arrears

Late filing of a default

Sometimes, defaults can be added to your credit report late. This is unlikely to cause any problems until the time when your default would be naturally removed from your credit file.

As we’ve already discussed, a default will show on your credit history for 6 years. However, if the default is filed late, it will show for 6 years from the time it first appeared. This means it could over-run and show on your report for weeks or even months longer than it should.

If this is the case, you may be able to have it removed as it comes to the end of the actual 6 year period.

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How to get a default removed from your credit file

Despite what you might read elsewhere, there’s only really one way to have a default actually removed from your credit file – and that’s to ask the credit reference agencies to remove it for you.

To do this, you’ll need to contact the three main credit reference agencies and raise something known as a ‘credit report dispute’.

When you do this, the agency will contact the lender who issued the default to check that it should be removed. In the meantime, they will put a ‘Notice of Correction’ on your file. A notice of correction is a small note that’s added to your file that lenders can see. In this case, it will explain that the default is being disputed. Lenders don’t have to take notice of this information, but they may if the defaulted debt looks out of place compared to the rest of your credit record.

If the default shouldn’t be there, they’ll remove it and your credit score should go back up.

However, if the lender insists that they’re right, the credit reference agency will let you know what your options are.

Other ways of ‘removing’ a default from your credit report

Unfortunately, the internet has lots of financial advice that doesn’t quite match reality. You won’t have to look far to find websites that tell you that your default can be removed if you repay the debt in full or look at a debt management plan.

While both these things can help your financial situation, they don’t actually remove the default.

Let’s look at why:

1. Repaying the money you owe

If you repay the money that’s owed – either the arrears or the full amount – you can add a Notice of Correction to your credit report to explain that the default is no longer relevant.

However, this won’t make it disappear.

Lenders will always prefer to see a default that has then been paid off – but until 6 years is up, the default will stay in place and may need explaining to lenders if you apply for credit.

2. Setting up a debt management plan or debt solution

Debt management plans and debt solutions are excellent ways of getting back on top of your financial situation if you feel you’ve lost control and can’t afford your repayments.

While you might not be able to borrow money while they’re in place, they’re solid proof that you’re trying your best to get back on top of your finances. When they’re done, you’re free to start building your credit rating again.

However, a debt management plan or debt solution (such as an IVA) doesn’t automatically wipe all the negative things from your credit history. That said, most debt solutions will run for 5-6 years – so when it’s done, your credit rating is likely to look good again.

Avoiding default notices and defaults

When it comes to defaults, one of the best things you can do is avoid them hitting your credit report in the first place. It’s much easier to avoid a default than it is to try to get one removed further down the line.

To do this, you need to know what you’re looking for. This is especially important if you don’t keep track of what happens day-to-day or week-to-week on your bank statements or banking app.

What does a default notice look like?

Default notices will always arrive by post – even if you’ve opted for email communication from your lender. As such, you should always keep lenders up to date if you move house. You should also open all your post quickly – even if you’d prefer to avoid any bad news.

According to the Consumer Credit Act, a default notice should always include two pieces of information at the top of the letter. It will say two things:

  • “Default notice served under section 87(1) Consumer Credit Act 1974”
  • “Important you should read this carefully”

The letter must also have the following information:

  • How much you need to pay now to get your account up to date
  • The deadline for making this payment. You should always get at least two weeks (14 days) to do this

There will also be an information sheet included. This is from the Financial Conduct Authority (FCA) and will suggest some places that you can get free advice about your finances.

Other default notice recommendations

The default notice will also recommend that you contact a solicitor or Trading Standards if you need help.

While this is an option, it’s fairly outdated text that has been in place since the text for default notices was agreed upon in 1983. Since then, there’s plenty of free advice out there that can be accessed much quicker and without cost.

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Should you consider a debt solution?

We’ve already mentioned debt solutions here – and while they won’t help you get default notices removed from your credit file, they can be a lifeline for people who feel like they’ve lost control of their money situation.

Defaults tend to happen when people’s outgoings are bigger than the amount of money they’ve got coming in. With energy bills and the general cost of living rising significantly over the last year, this is a situation many people will find themselves in – even if debt had previously been manageable.

A debt solution – like an Individual Voluntary Arrangement (IVA) – will gather up all your debts and transform them into one manageable monthly payment, accounting for your cost of living going forward.

Debt solutions aren’t right for everyone – but they can be an amazing way of ‘hitting reset’ on your finances – giving you a future where your outgoings are more manageable and in control.

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