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Default notices, missed payments and your credit file

i The advice on this page applies to anyone with personal debts taken out in the UK.

If you miss payments or you don't pay the right amount, your creditor may send you a default notice, also known as a notice of default. If the default is applied it’ll be recorded in your credit file and can affect your credit rating.

An account defaults when you break the terms of the credit agreement. Your creditor decides there’s no chance you can get back on track, and cancels your agreement with them. A debt can only default once, but after this happens your creditor can take further action to collect the debt.

Find out more about what creditors can do.

The following information applies to default notices for missed payments to accounts that aren’t covered by the special measures introduced in response to the coronavirus situation.

Default notices FAQs

What is a default notice?

This is a letter from your creditor warning that your account is about to default because you're behind with your payments.

The default notice will give you at least two weeks to catch up with any missed payments. If you can do this your account will carry on as normal. If you can't pay the missed payments in this time your account will default.

A default notice is normally sent when you've missed or paid less than the full amount for three to six months.

Default notices only apply to debts regulated by the Consumer Credit Act. These include credit and store cards, payday loans, personal loans and hire purchase.

Does a default notice affect your credit rating?

The notice of default doesn’t affect your credit file, but when the account defaults this will be recorded. After the marker for the missed payment or default is added to your credit file, your credit score will be updated by the credit reference agencies.

A default on your account shows that you’ve not kept up to date with the agreed payments. If you apply for credit in the future, creditors are likely to see this information. They’ll usually assume that the default means there’s a higher risk of you not paying them back.

As a result it may be harder for you to take out products like a new loan or credit card, or open certain bank accounts. You may also find it difficult to get a new mortgage.

Find out more about how debt affects your credit file.

If the debt is regulated by the Consumer Credit Act, you must be sent a default notice warning letter and have time to act on it before the default is recorded on your credit file.

What happens when you get a default notice?

Your creditor will ask you to pay the full amount of the debt instead of paying the instalments you first agreed. You can offer to pay in instalments at a rate you can afford, but your creditor may not agree to this.

Your creditor can also take further action after the account has defaulted, including:

  • Passing the debt to a collection agency
  • Taking court action
  • Applying to a court to take back a vehicle or other goods, if the debt was hire purchase

If the debt is regulated by the Consumer Credit Act, your creditor can't take any of these actions unless the account has defaulted.

If you’re worried about missing payments and getting a default notice, we’re here to help you. We’ll look at your budget so we have a clear understanding of your financial situation and give you free, personalised advice on ways to deal with your money worries.

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How do I recognise a notice of default?

A default notice has 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'

The default notice will also give you the following information:

  • How much you need to pay to bring your account back up to date
  • The deadline to make this payment – you must get at least 14 days to do this

An information sheet from the Financial Conduct Authority (PDF) will be enclosed with the default notice recommending you get free debt help, from us or another charity.

A default notice will suggest you contact a solicitor or Trading Standards for help. You don’t need to do this. The wording of default notices was set in a 1983 law, before free debt help from charities like us was widely available.

Defaulted accounts and your credit file

A default will appear on your credit file for six years, even if you pay off the debt in full.

This means it’ll be harder to get credit cards, loans or bank accounts because the default tells the creditor there’s a greater risk of you not paying. You'll also find other types of credit such as mortgages and even mobile phone contracts may be harder to get.

Any creditor who checks your credit file in this time will see the default. They'll take this into account if you apply for other credit.

After six years, the defaulted debt will be removed from your credit file, even if you haven’t finished paying it off.

Some creditors will refuse your application when they see the default on your credit file. Others will give you credit but they'll charge you a higher rate of interest. It won’t be impossible to get credit, but you may have less choice and cost you more.

Some jobs in the financial services sector may be affected if an account defaults. This is not common. This is a risk if your current employer regularly credit checks you, or if you’re applying for a new job that requires a credit check.

Please contact us for further advice if you think this might affect you.

It's important to remember that a default doesn't last forever. You'll find creditors are less interested in the default as time passes, and eventually it’ll disappear from your credit file.

Debt management plans and default notices

It’s normal to receive default notices if you’re on a debt management plan (DMP) or token payment plan (TPP). All this means is that you've been paying less than the agreed minimum monthly payment to your debts. Just continue with your plan payments as normal.

If a debt is passed to a collection agency, they'll get in touch with you to let you know that they're now looking after the debt. Should this happen, tell them that you're on a DMP or TPP. Let your DMP or TPP provider know the debt's now being looked after by a debt collection agency, and they'll make sure that your monthly plan payment is distributed correctly.

Should you get a ‘letter of claim’ from your creditor, or any paperwork from the county court after receiving a default notice, please let your DMP or TPP provider know. They'll be able to talk you through what to do next.

What should I do if I get a default notice or my account defaults?

A default is a warning sign that you can’t afford your current payments. You should get free and impartial debt help before your creditors take any further action.

Take two minutes to answer a few simple questions and find out if debt advice is right for your situation.

Or you can call us for expert advice, free from all landlines and mobiles.

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