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How a default affects your credit score

A default occurs in the UK when a lender decides to close your account due to missed payment, regardless of the amount owed. This leaves a negative mark on your credit file, lowering your credit score significantly and making it much harder to borrow money in the future.

How long does a default stay on your credit report?

A default stays on your credit report in the UK for 6 years from the date it was issued, even if the debt is later paid off.

There are only three ways to avoid having a default on your credit report:

  • Pay the amount within 14 days of receiving the default notice;
  • Prove it was an error by contacting the credit reference agency and the lender;
  • Or wait 6 years.

After the six years have passed, the default is automatically removed from your credit file. The credit reference agencies will do this themselves; you don't need to reach out to them or fill out any forms.

However, this doesn't mean that the default is completely gone after the 6 years mark. While lenders can't see it on your credit report, they can still ask you if you ever defaulted on your debt. Unfortunately, you are legally required to tell them if you have. Please don't panic, though a default from long ago is unlikely to have much impact on the lenders' decision on whether they will approve your application or not. So it's best to be truthful if this ever happens.

How much can a default affect my credit score?

A default can hurt your credit score quite a bit. According to Experian, a default can reduce your credit score by up to 350 points out of a maximum of 999. That's more than a third!

A default, though, doesn't come alone:

  • The original missed payment will have also knocked off about 80 points from your credit score.
  • If the lender takes you to court to recover the debt and obtains a CCJ (County Court Judgment) against you, this will take another 250 points off your credit score.

In other words, defaults are seen as severe negative marks, and their impact on your credit score can be severe and long-lasting. And while their impact tends to fade over time, they will be a huge red flag for the next six years.

How can I avoid a default?

If you think you can't make the payments on your debt and are concerned about the risk of a default, here are some steps you can take:

  • Set up Direct Debit to make sure you make your payments on time and don't accidentally miss one.
  • Contact debt charities like StepChange or Citizens Advice to get advice on dealing with debt. They can also mediate between you and your lender.
  • Talk to your lender. They can offer solutions like payment plans or even temporary payment holidays to help you avoid defaulting.
  • Consider a balance transfer credit card. This is a kind of card that can consolidate debts from other credit cards. Most importantly, it gives you a period of time during which you can make payments with 0% interest. This can help you stop interest from snowballing beyond control.
  • If you receive a default notice, act quickly to pay it off. If you pay it within the 14-day notice period, you can prevent the default from being added to your credit file.

The most important thing here is to be proactive and not shy away from your debt. Talk to your lenders, talk to debt charities, and do your best to avoid having a default on your file.

How can I improve my credit score after a default?

If you have a default, your credit score looks quite bad. However, there are a few things you can do:

  • First, explain to future lenders why the default happened. Reach out to the credit reference agencies and ask them to add a Notice of Correction to your file. This is a short, 200-word note that lets you explain why you couldn't make your payments on time.
  • Second, make sure you don't miss any more payments. Set up a Direct Debit. Talk to a debt charity. You can also check out our guide on how to improve your credit score after a default.
  • Third, download a credit-building app like Wollit. Wollit reports your monthly subscription as loan repayment, helping you rebuild your credit history in a way that's much safer than a credit-building card or loan.

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