If you have a default on your credit report, you might find it’s a bit harder to borrow money. However, there are ways you can lessen the negative impact. To help improve your chances of accessing credit, here are a few tricks that can help your credit report bounce back.
What is a default on a credit report?
A default is marked on your credit file when a lender closes one of your accounts due to missed payments. For instance, say you haven’t been able to keep up with your household bills for around 3-6 months.*
Accordingly, a utility or mobile phone provider might decide to close your account and stop you accessing their service.
How long does a default last for?
A default stays on your credit file for 6 years. It will remain there even if you clear your debt, so it’s important to try to avoid getting one altogether. If you do have a default on your credit report, it can make it trickier for you to borrow money. This could be in the form of higher rates than you were expecting, or simply not receiving any credit offers at all when looking for a loan, credit card or mortgage.
Can I get someone to remove a default?
You can only get a default removed from your credit report if you can prove that it was an error. Get in touch with the credit referencing agency and explain the situation. The credit referencing agency should then get in contact with the lender to check the accuracy of your claim. They’ll add a ‘Notice of Correction’ in the meantime to signal to other lenders that the default may be a mistake.
If the lender realises the default is an error, they will update your credit file. If they don’t agree however, the default will remain on your credit file.
Can I reduce the impact of a default?
Although the default will remain on your credit file for six years, there are a few things you can do to slightly lessen the impact.
- Pay off what you owe – although this won’t remove the default from your file, once the debt is paid off, they mark it as ‘satisfied’. Although it doesn’t completely negate the negative impact, it will look better to lenders.
- Offer an explanation – it is possible to get in touch with a credit referencing agency & ask them to add a note explaining the circ*mstances around your default. For instance if you experience a redundancy.
- Wait it out – if you get your finances back on track, the negative impact of the default will reduce over time. So, after a few years, you may find you have more credit options again.
Can I rebuild my score in other ways?
Yes, concentrating on other ways you can improve your credit score could improve your access to credit. A few quick tricks include:
- Register to vote – being on the electoral roll helps lenders verify your address and makes you appear more reliable.
- Keep your credit utilisation low – say that you already have a credit card. Only spending 30% of your available credit limit each month can improve your credit score. However, this is only true if you’re making at least the minimum monthly repayment. More missed payments could make your credit report worse, so only borrow what you can afford to pay back.
- Get a credit builder card – suppose you don’t already have a credit card and you think you’re back on track with your finances. You could check if you’re eligible for a credit builder card. These cards are often available to those with less than perfect credit histories. Use it for a few small purchases and pay it off in full each month: as a result, you can rebuild your credit score over time.
- Clear any outstanding debt – it’s not always easy to clear your outstanding debt, but clearing down as much as you can each month, even a small amount is recorded each month and counts against your score
Want to see how your eligibility for credit is shaping up? You can quickly check your options with over 50 UK lenders with Aro, without impacting your credit score.
FAQs
Once a default is recorded on your credit profile, you can't have it removed before the six years are up (unless it's an error). However, there are several things that can reduce its negative impact: Repayment. Try and pay off what you owe as soon as possible.
How many points will my credit score go up when a default is removed? ›
On average, most people see an increase of about 200-250 points. But you shouldn't wait six years. You can still fix your credit file even if you have CCJs on your file. One way to do it is by using credit builder tools like Wollit.
Will my credit score go up if I settle a default? ›
Pay off what you owe to satisfy the default
Although it will continue to appear on your credit file for six years, a satisfied default can have less of a negative impact on your credit score than an unsatisfied one. This will also help you avoid court action and further negative markers on your report.
Is it worth paying off a default? ›
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.
How to clear a default on credit history? ›
You can only have a default removed if it was listed in error. A default will remain on a credit report for five years. If a default is paid, the status will be updated to 'paid' however it cannot be removed.
How do I rebuild my credit score after default? ›
Try repaying as much as you can. Keep making regular payments on time. It also helps you avoid another default. Keep your credit utilisation low.
Do I still have to pay a default after 6 years? ›
For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts. If your home is repossessed and you still owe money on your mortgage, the time limit is 6 years for the interest on the mortgage and 12 years on the main amount.
What is the highest your credit score can be with a default? ›
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.
Can I get a mortgage with a default? ›
Your default does not need to be satisfied before you can be approved for a mortgage, but your chances of approval will increase if it has been settled. Fortunately, bad credit mortgage providers can look at other factors surrounding an unsatisfied default, such as the age of it and the reason it occurred.
Is it better to settle or pay in full? ›
So, if you've fallen behind on payments, it's crucial to address the situation head-on as soon as possible. In general, paying off your credit card debt in full is the optimal solution that preserves your credit score and history.
with lots of problems on your credit record, getting one debt marked as partially or fully settled probably won't make much difference at all; if you can't afford to repay all your problem debts, it's usually better to settle as many as possible partially, rather than take longer to repay them in full.
How long does it take to recover from credit default? ›
Whether you pay off the obligation or not, a default will remain on your credit history for seven years from the date of default. The good news is that the lender cannot re-register your default once they erase it. This holds true even if you still owe them money.
Do defaulted loans ever go away? ›
If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.
Can I apply for a credit card I defaulted on? ›
If you default on a credit card, it's possible you may never again be approved for a credit card from that particular card issuer — even if you rebuild your credit to the point where you can qualify for other cards. Issuers keep track of which customers have had debt charged off.
How serious is a default? ›
-Your credit score will be damaged. -You may have difficulty qualifying for credit cards, car loans, or mortgages, and will be charged much higher interest rates. -You may have difficulty signing up for utilities, getting car or home owner's insurance, or getting a cell phone plan.
Can a credit provider remove a default? ›
A default can be removed if the debt wasn't even yours. This could happen if there's a simple case of mistaken identity or someone has fraudulently taken out the loan or bought something on credit in your name.
How do I get a defaulted loan off my credit report? ›
If the loan is paid in full, the default will remain on your credit report for seven years following the final payment date, but your report will reflect a zero balance. If you rehabilitate your loan, the default will be removed from your credit report.
Do defaults disappear after 5 years? ›
A default stays on your credit file for 5 years from the date of missing your first payment. Even if you pay off the outstanding amount eventually, the default remains. Can a default be listed twice? After 5 years, once the default is removed, your lender can't re-register it even if the amount is unpaid.
How long do unpaid credit defaults stay on your record? ›
