What is a Default on a Credit File?

What is a default?

A default, in a financial context, is when you miss payments on money you’ve borrowed, or you’re unable to pay on time.  This could be on an account that you have with a bank, mobile phone company, or utility supplier.

If you continue to miss payments and don’t make up your agreed payments, the company you owe money to (often called a creditor) may decide that you’ve broken the agreement. This is known as defaulting on the account. More details can be found in your specific agreement and within the terms and conditions.

What is a default notice? 

Before a default is added to your credit file, you may be sent a default notice. This is sometimes called a ‘notice of default’ (NOD). This is a formal letter from your creditor to explain that you’ve missed payments, and your account may be at risk of defaulting. It will also outline what action you need to take. The default notice itself does not affect your credit file, but if the account then defaults, this can impact your credit file.

Default notices only apply to debts that are regulated by the Consumer Credit Act 1974, such as personal loans, credit, and store cards.

The default notice is sent to you as a statutory requirement. This means that your creditors (the people you owe money to) are required to send this to you if your debt falls under the Consumer Credit Act 1974. The notice will tell you about your missed payments and explain how you have broken the terms of your agreement (e.g. not making the regular payments agreed upon). The notice will give you a specified period of time for you to make up the missing payments (if you’re able to) before the agreement is then defaulted. You will need to refer directly to a default notice issued to you for the specific information.

 
As part of the default notice, your creditor may state that if you don’t take action, your account may be terminated, meaning that the full balance is then due. A default may then be added to your credit file, and the account could be passed to a debt collection agency.  

What happens if you get a default notice?

A default notice must include specific details which are required by law.

This includes information regarding the agreement, what breach has occurred, any actions required to remedy the situation and any potential consequences of failing to comply. It must contain information about the nature of the breach and a timeframe to address it.

If you are unable to complete the steps outlined within your letter within the timeframe provided, potential consequences and next steps could include: 

• A default being added to your credit file, which may make it harder for you to borrow in the future.
• The debt is passed to a debt collection agency.
• Legal action is taken, for example a County Court Judgment (CCJ), which may incur additional fees and charges.

You will need to refer to the default notice that you have received for specific information about the consequences/next steps relating to your account. 

What is a default on a credit file? 

If you’re unable to make a full payment within the timeframe given in the default notice, a default could be recorded on your credit file.

If a default is recorded on your credit file, this is effectively a marker which shows that you have broken the agreement. It can be seen by potential lenders if you try to obtain future credit.

If you need more information about credit files, read our guide on how your credit file affects you. Or you can find free independent advice at Money Saving Expert. 

Does a default affect your credit score?

Yes, a default can affect your credit score. Your credit file will show that you missed the agreed payments on your account, which can impact your credit score. This means it may be harder to get things like loans, credit cards, mortgages, or certain types of bank accounts. This is because a default can be seen by future potential lenders.

If you're concerned about a default appearing on your credit file and feel you could use some extra support, there are plenty of organisations that can help. Visit our support hub for links to independent advice services such as Money Wellness and National Debtline.

How long does a default stay on your credit file? 

For most debts, a default will remain on your credit file for six years. Once the default is paid off, the account may be updated to reflect one of the following statuses:

• Satisfied – This status will show once the outstanding balance has been paid in full.
• Partially Satisfied – This indicates that less than the full amount was paid, following an agreement with the creditor (often referred to as a discounted or partial settlement). Some credit files may display this as a “P”.

After six years, the default will be removed, even if the debt from the default hasn’t been fully paid. 

Does a default affect your ability to borrow in the future?

A default on your credit file may make it harder to borrow money in the future.

When you apply for credit like a credit card, loan, or mortgage, lenders check your credit file to try to understand what kind of borrower you are. They look at things like whether you’ve made payments on time and in full.

A default shows lenders that you’ve missed several payments in the past. This may make it harder to get approved for credit. If lenders are prepared to lend to you, they may not lend you the full amount and you may not be offered the most competitive rate.

Can Lowell register a default?

Yes, Lowell can register a default. If we purchase an account before the default was registered, then Lowell may default the account if payments do not meet the original contractual terms.

Alternatively, a default on your credit file may show as being registered by Lowell even if it was initially registered by the original company. This is because once Lowell has purchased your debt, the default transfers along with the debt. When a default is registered in Lowell’s name, we have a responsibility to make sure the information is up-to-date and accurate.

We will take steps to report to credit reference agencies that you’re making payments, which will be reflected on your credit file, and in turn, reduce your balance.

If you think that a default has been noted on your credit file incorrectly, or if something else isn’t right, please get in touch and let us know. You can also raise disputes on your credit file directly with credit reference agencies (CRAs) such as TransUnion, Equifax, and Experian.

At Lowell, we’ve partnered with TransUnion, meaning that our customers can easily check their credit score for free using our mobile app.

Can you remove a default from your credit file?

Once a default has been recorded on your credit file, it will remain for six years. Even if you pay the balance in full, a default won’t be removed but updated to either ‘fully satisfied’ or ‘partially satisfied’ to reflect this.

If you’ve looked at your credit report using one of the free checks and find a default on your credit file that you think is incorrect, you can ask for it to be investigated.

To do so, you’ll need to get in touch with each of the credit reference agencies and raise a ‘credit report dispute’ explaining why it should be changed. They will contact the original lender to check their records and/or the company that owns the account, such as Lowell.

Can Lowell remove a default from my credit file? 

If you’re concerned that Lowell has added a default to your credit file that shouldn’t be there, or the six-year period has passed, you can get in touch with us to let us know. Our team will investigate the issue and assess how it needs to be resolved.

If the six-year period has not passed and the default has been correctly registered, Lowell can’t remove a default from a credit file. However, if you’re working with us on a payment plan, we’ll let the credit reference agencies know that you’ve started making payments.

Is a default the same as a County Court Judgment (CCJ)? 

No, a default is not the same as a County Court Judgment (CCJ).

A default occurs when a credit agreement is broken due to missing payments or not paying the full amount.

A CCJ is when a creditor or company takes legal action by registering a Court Order, specifically a County Court Judgment (CCJ), against you as a result of a defaulted debt. For more information, you can read our in-depth guide on CCJs and how they impact you.

Can I reduce the negative impact of a default? 

Having a default on your credit file can feel worrying. At Lowell, we’re here to help. Speaking to us and setting up an affordable payment plan for your Lowell debt is a positive step.

Repay what you can 

Paying what you owe as soon as you can helps to show that you’re trying to clear the debt. Once the full balance is paid, it will be marked as ‘satisfied’ on your credit report, which is what lenders will see.

We know that everyone’s circumstances are different and that paying off your debt may seem difficult, but once you get in touch with Lowell, we’ll do our part to make sure that your payments work with your budget and help you to clear your Lowell debt. You can use our Budget Calculator to work out how much you can afford to pay, and work with us to start clearing your debt.

If you would like some additional support, there are lots of organisations who can help you. Visit our support hub with links to independent advice services like MoneyHelper, Citizens Advice, Samaritans, and more.

Add a note to your file 

In some situations, you can ask Credit Reference Agencies to add a note to your credit file. Although this note won’t remove the default, it may help provide context for potential future lenders.

For example, if you fell into debt and your account defaulted because you were made redundant, or suffered a serious illness, adding a note could help explain why it happened.

Look at improving your credit score 

Your credit history is also used to create a credit score, based on the information in your credit file. You might be able to take steps to improve your credit score. These steps include things like making sure you’re registered to vote and checking that your accounts are using the right address for you.

If you’re a Lowell customer, you can check your credit score via our mobile app due to our partnership with Transunion.

Speak to your creditors

If you’re finding it difficult to manage payments, getting in touch with your creditors might feel daunting, but it can be a helpful first step as they may be able to review your payment plan to find an affordable solution.

At Lowell, we can help you work towards clearing your debt with us. We can also offer you support and help you establish a payment plan that works with your budget, to make it easier for you to repay your Lowell debt.

Start your journey to becoming debt-free with Lowell today by getting in touch with our team to sort out a sustainable payment plan with Lowell. For more information about debt and working with Lowell, check out our Debt Guidance section.

You can also get free advice from an independent organisation if you need help with defaults on your credit file.