Default Notices Help & Guidance

Default Notices

Default Notices: What You Need To Know

If you’ve found a default on your credit report or received a default notice from your creditor, the information on this page should help you make sense of what it is, and what it means for you.

What is a default?

A default is a marker on your credit file which indicates that you have missed payments to the account and usually means that the account has been closed or you can no longer use it to access credit.

A default will usually be registered once you have missed three to six payments but this will vary between lenders/creditors. 

What is a default notice?

A default notice is a warning letter from your creditors which notifies you that you are behind on payments and your account will be in default if not paid. You will usually receive a default notice when you’re behind on your payments or when you’ve missed a payment, or paid less than the full amount for 3-6 months. A default notice will only be issued in relation to a debt which is regulated by the Consumer Credit Act like a personal loan, credit card, store card or hire purchase. For some debts you could still get a default without receiving a default notice first, such as mortgages or utility bills.

What does a Notice of Default look like?

A default notice should have the following text at the top in large or bold letters: 

‘Important you should read this carefully’ 

‘Default notice served under section 87(1) Consumer Credit Act 1974’ 

It will also state how much you need to pay in full and how long you’ve got to make this payment. Along with an information sheet from the Financial Conduct Authority recommending you get debt help from someone like us or a charity. 

Does a default affect my credit report/file?

A default does affect your credit file. Once a default is applied this will show on your credit file for a period of 6 years and will in turn reduce your credit score. At the end of the 6 years, the default and the debt will both disappear from your credit file completely. Once it has been removed, it can’t be re-registered. 

What happens when I get a Default Notice?

When you receive the notice your creditor will ask you to pay the full debt amount instead of paying the instalments you first agreed.

Here are a few things to remember once the default is applied to your account:

  • The debt might be passed to a collection agency
  • A marker will be added to your credit file and stay on it for 6 years
  • In some cases if the debt is regulated by the Consumer Credit Act, your creditor can take court action and apply to a court to take back a vehicle or other goods, if the debt was hire purchase.

How will a default affect my credit score?

Firstly, it’s important to understand that there is no universal credit score. Different Credit Reference Agencies (CRAs) have different top scores and different bandings. Credit scores give you an indication about whether you’re likely to be accepted for a credit application, but lenders don’t actually use them. They will have their own internal processes for deciding whether to lend to you.

A default will impact your credit score quite significantly when it’s first applied but, as it ages, it’s impact will lessen, and you will see your credit score start to improve after a couple of years.

Paying the default won’t improve your credit score (unless you pay it within the first month, in which case it will be removed completely) but it may improve your chances of getting credit further down the line. You will also get less contact from your creditor if you’re paying something towards the debt.

Can I stop a default?

The only way to stop a default is by paying what the lender wants you to pay. This is fine if you can afford to clear the arrears and maintain the minimum payments going forward but, if you can’t, and particularly if you’re struggling with other debts as well, trying to stop one debt from defaulting will not help you in the long run.

If you have problem debt which you can’t afford to pay, it may be better to accept the defaults now, knowing that they will disappear completely in 6 years, than potentially cause a longer term impact by missing payments to several debts over a long period of time.

Can I still borrow when I have a default?

It will be harder for you to take out products such as a loan, credit card, a new mortgage and even open certain bank accounts when you have a default. 

When creditors see a default on your credit file they will assume that there’s a higher risk of you not paying them back. This is because you’ve struggled to repay money in the past so it will make it difficult for you to get credit again. There are some lenders which specialise in lending to people with defaults and other problems in their credit history, but they charge higher rates of interest so will be more expensive. 

You may be more likely to get approved for credit once the defaults are a couple of years old and lenders can see you haven’t had any further difficulties. 

Whilst you are in a debt solution we would not recommend any form of borrowing. 

Should I pay a defaulted debt?

Paying a default won’t improve your credit score so you might wonder if it’s worth paying it when it will stay on your credit file regardless. But, if you choose not to pay the debt, you run the risk of the creditor applying for a County Court Judgement (CCJ). A CCJ is regarded as being worse than a default and would show on your credit file for another 6 years from the date it’s added.

Also, whilst paying down the debt won’t directly impact your credit score, lenders may see it as less of a problem and take it into consideration when deciding whether to lend to you.

What should I do if I am getting defaults?

If you can’t afford to pay your debts, you should get free debt advice to see what your options are. You can get free debt advice online using the button below.