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.
Free debt advice is available 24 hours a day. Use our online debt advice tool - take your time, pause and restart your advice session when it suits you.
Or you can call us for expert advice, free from all landlines and mobiles.