Defaults can appear on a credit file when several credit repayments are missed in a row. Consequently, this will have a bad impact on a credit score.
Defaults remain on a credit file for six years. Lenders might automatically decline a loan application if an applicant has defaulted on a previous credit agreement. Even if this happened a few years ago.
Registering a default
Creditors issuing a ‘default notice’ do not record an immediate default. Debtors receiving one of these notices have at least two weeks to get an account back on track. Lenders issue defaults soon after these notices. Accounts passed on for debt collection can result in a default. Additionally if a creditor thinks the relationship with a borrower has broken down (e.g. they don’t answer letters or phone calls), they may register a default.
The Information Commissioners Office recommends a default is not registered until six consecutive payments have been missed.
However, short-term loans lasting under 36 months might have a default registered sooner. Consequently a default can appear after just three consecutive missed payments.
Credit reference agency status codes 1,2,3 indicate 1,2,3 months’ missed payments. For weekly repaid loads this is approximately 5 weeks, 9 weeks and 13 weeks missed payments. Missed payments are always recorded in months.
Creditors may also record a default in the following circumstances:
- Repossession of your home.
- Cutting off services, including gas and electricity
- Repossession of a vehicle.
- You leave an address without telling a creditor.
- Fraud is suspected.
- Insolvency, including bankruptcy, Debt Relief Orders or Individual Voluntary Arrangements.
Lenders must give you 28 days’ notice if they are going to register a default. However, in 4 – 5 (above) lenders can file a default as soon as they become aware of the situation.