Credit Score Basics > How do you get rid of a default on your credit file?

How do you get rid of a default on your credit file?

Having a default on your credit file means a harder time getting credit cards, loans, mobile phone contracts, or even opening current bank accounts.

But a default doesn’t last forever – here’s how to get rid of it.

What is a default?

A default is what happens when a company closes your account because you have missed payments. Defaults usually happen with banks and other lenders, but they can also occur with a mobile phone company or utility supplier (like a gas, water, electricity, or internet provider).

Once a default occurs, it is reported to the credit reference agencies, who then mark it on your credit report.

How long does a default last?

A default will remain visible on your credit report for six years, even if you pay off the debt entirely.

During these six years, you'll find it difficult to get any kind of loan, even a mobile phone contract. Getting a mortgage, of course, will be especially difficult.

And even when you get approved, you might be asked to pay higher interest rates.

How do I remove a default from my credit report?

There are three ways to remove a default from your credit history: wait six years or submit a Notice of Correction.

Once six years have passed, the lender cannot re-register the default – even if you still owe money. That's not to say that the debt is gone. You should still continue to make any remaining payments, as the lender could go on to register a CCJ against you. A CCJ will be visible for another six years on your credit report and is also generally seen as much more severe than a regular default.

The second way to remove your default is possible only if you prove it was an error. This is how the process works:

• Get your credit report from all three credit reference agencies (Experian, Equifax, TransUnion)
• Spot the error
• Contact the agency where the report was incorrect (all three if needed)
• They will contact the lender and ask them to verify.
• In the meantime, the agency will add a "Notice of Correction" to your credit report.
• If the lender agrees that the data was incorrect, the credit reference agency will update your credit report.
• If the lender disagrees with you, the default will stay on your credit file. In this case, the agency will let you know and help you understand what you can do next.

There are three important things to remember here.

First, Experian, Equifax, and TransUnion do not have the power to remove or change a default without the lender's permission. They can only mediate the dispute.

Second, you should regularly (once a year) check your credit report to ensure everything is correct.

Finally, even if you can't get a default removed, submitting a Notice of Correction is still worthwhile. It signals to other lenders that the default might have been a mistake and gives you a chance to explain the situation.

How can I reduce the impact of a default?

Once a lender reports your default to the credit reference agencies, it will stay on your credit report for six years – unless it was an error and the lender agrees to remove it.

That being said, there are a few things you can do to reduce the negative impact of a default:

• Pay back the debt. Once the debt is paid, the default will appear as "satisfied" on your credit report. This tells lenders that you're a good borrower, after all, and significantly reduces the impact of the default.
• Add a note to your credit report. This is different from the "Notice of Correction", by the way. You can do this by contacting the credit reference agencies and asking them to add a note explaining to lenders why you could not pay your debt. This is especially useful if you're suffering from a long-term illness, lost your job, or had another serious reason outside your control. It also offers a chance to tell your side of the story.
• Wait. A default might stay on your credit report for six years, but older defaults carry less weight. So, even if you were rejected for credit recently, it might be possible to re-apply after a few years and get approved.

Finally, you should also work towards rebuilding your credit score and reducing the impact of your default.

Here are some of the things you can do to improve your credit score:

• Register to vote: it takes five minutes and can add up to 50 points to your score.
• Keep paying down any existing debt. Even if you can only afford to pay back a small amount each month.
• Use less than 30% of the credit limit if you have a credit card. This tells lenders that you don't live on credit and helps you make the monthly repayments more affordable. The last thing you want is another missed payment or default.
• Get a credit-building card. These cards are specifically created for people with bad credit scores. Once you get one, use it for only a few small purchases and pay it back each month. Otherwise, you'll be hit with extremely high interest rates and fees – typical APRs for credit-building cards are around 30-60% per year.
• Download a credit-building app like Wollit. Wollit reports your monthly subscription as a loan repayment to all three credit reference agencies (Experian, Equifax, and TransUnion), helping you rebuild your credit score. It also reports your rent payments, further helping you show future lenders that you're financially responsible and pay your bills on time.

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