What is a default?
A default is added to your credit file when a creditor has cancelled your account because you’ve missed payments.
How does a default affect my credit rating?
When a creditor defaults your account, the default is added to your credit file and will remain there for six years from the date of default. Lenders take a dim view of defaults, as they show you have had difficulty managing credit payments in the past.
Can I get a default removed?
You will usually be able to get a default removed from your credit file if there has been an error, for example if the debt does not belong to you or your payments are actually up-to-date.
However, you may be also able to get a default removed if:
- You were unaware of the debt
- Your debt relates to an unaffordable loan
- Your default is for a small amount
- You’ve been the victim of financial abuse
Getting a default removed from your credit file will take patience and perseverance but, if successful, will prevent 6 years’ negative impact on your credit rating. Keep in mind that old adage ‘if you don’t ask, you don’t get’.
How to get a default removed
- Errors – If a default record has been added to your credit file in error, you can contact the Credit Reference Agency directly to ask for it to be removed. They will then contact your creditor to verify the information you’ve given. The creditor will need to agree for the default to be removed.
- Other – Another way to get a default removed is to appeal directly to your lender in writing. You should explain the (good) reasons why you missed the payments (redundancy, illness etc), and tell them that you have learnt from your past mistakes and have turned over a new leaf. You can also explain the impact that a default will have on you and your family, but stop short of an X-Factor-worthy sob story.
I was unaware of the debt
If you have moved house and informed the creditor, but they’ve sent paperwork elsewhere, you may be able to get them to remove the default, particularly if you’ve had a good payment history prior to this.
The debt is from an unaffordable loan
If your default relates to a payday loan, you may be able to argue that you never should have been given the loan in the first place as it was unaffordable. If you can show this to be the case, you may be able to convince the lender to remove the default.
The debt is small
If the default is for a relatively small amount, you could point out that it seems unfair to have the default hanging over you for six years, affecting your ability to buy a house, for example.
Gestures of goodwill
If you had been a good customer for a long time before the default, you could ask for the default to be removed as a gesture of goodwill. It might seem cheeky, but there’s no harm in asking.
Is there anything else I can do to lessen the impact on my credit rating?
If you are unsuccessful in getting a default removed, you may be able to lessen the impact on your credit rating by;
- Repaying promptly
- Adding a note to your credit file
- Changing the date of default
While payment alone will not remove a default from your credit file, it will look better to lenders than a default which remains unpaid long after the default date. When you pay a default, it will be marked as ‘satisfied’ on your credit record.
Adding a note to your credit file
Depending on your reason for ending up in arrears, it may be worthwhile adding a note to your credit file. If you fell behind with payments because you lost your job, for instance, an explanatory note may do enough to convince potential lenders that these were mitigating circumstances, rather than habit.
Changing the default date
If you think the lender has added the default too late, you may be able to challenge the default date, thus getting it off your credit file sooner. Defaults stay on your file for six years from the date of default, so it is important that this date is accurate.
Professional advice from Scottishtrustdeed.co.uk
If you need help understanding or managing your debt, Scottishtrustdeed.co.uk can help. We are professional debt specialists ready to give you non-judgemental debt advice to help you get back control of your finances.
I have received a default notice but I have a Debt Management Plan, IVA or Scottish Trust Deed. What do I do?
If you have a Debt Management Plan or Token Payment Plan, you may receive a default notice in relation to your debt. This is because you are paying less than the agreed monthly minimum payment on the account. You should continue to make your Debt Management Plan payments as normal.
How do I get my credit report?
You can get a free copy of your credit report from any of the credit reference agencies (CRAs). The three major CRAs in the UK are:
Who else can see my credit file?
Your credit file is viewed by lenders when you make an application for credit, but in some cases may also be viewed by an employer.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
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