By Neil Stone – Social Media Executive
A default can have a big impact on your credit report, and can be recorded for just a few pounds to several thousand. I find there is quite a lot of confusion around default so I’ve put together some answers to common questions.
What is a default?
A default occurs when an account has had consecutive missed payments and is then closed by the lender.
There is no set number of payments that can be missed before a default is recorded. When the lender considers that the relationship between you has broken down it can record a default.
A default date will be recorded on the account and it will be kept on your credit report for six years from the default date. After this time it is removed from your report automatically even if the full amount isn’t paid.
Some lenders will still send us monthly updates on a defaulted account. This doesn’t change the default date or when it comes off the report.
I’ve paid a default, what happens next?
Once paid the account is updated to show as satisfied and a satisfaction date may be recorded.
Making a payment will not change the default date, or the date it comes off your credit report.
If a partial settlement is agreed then a flag will be added to the entry to show this and the account marked as satisfied.
Importantly the default date will not change and the account will still be removed 6 years from the default date.
What happens if a debt is sold?
If a debt is sold to a debt collector, they can then record it as a separate entry on your report. The original account will be marked as satisfied and a “debt assigned” flag will be added so lenders will know it has been passed on. The default date won’t change if the debt is sold.
Will I get a sent a default notice?
It’s good practice for a lender to send you notification that it intends to default an account and give you an opportunity to bring the account up to date. However a company doesn’t necessarily need to do this to record a default on your credit report.
This is because a default issued under a Consumer Credit Act (which would need a default notice to be sent) and a default recorded on your credit report are different things.
As long as the default recorded on your report accurately reflects events, and you were told when the account was opened that this could happen (usually covered in terms and conditions) then a company would not need to issue a notice of default.
Is my default Statute Barred?
Although a default will be removed from your report after 6 years the lender may still pursue you for the debt, unless the debt is statute barred.
A statute barred debt is a debt which is seen as unenforceable as the creditor has not chased it in the period allowed.
If you have not made payment or signed acknowledgment of a debt in writing for 6 years in England and Wales and 5 years in Scotland then it could be statute barred.
Your credit report won’t show whether a debt is statute barred. You may want to contact a free debt advice charity such as www.stepchange.org if you believe this to be the case.
Source for notice of default.
Source for statute barred.