How To Clear A Default On Your Credit Rating

Have you been wondering how to get a default removed from your credit file? If so, this guide is for you.

If you have received a default letter or already have a default on your credit history and want to know what to do now, you'll find straight-shooting info right here.

What is a default notice?

A Notice of Default letter is a warning from a creditor that you have missed payments on your credit agreement. They typically send the default notice when you have not been paying (in full or in part) for three to six months.

They will contact you and ask for full payment, giving you at least two weeks to catch up. If you do not pay the money owed, the account will default and you may:

Start to be chased by a collection agency
Taken to court and issued with a County Court Judgment (CCJ)

These notices can only be sent on credit covered by the Consumer Credit Act, such as credit cards, personal loans and mobile phone contracts.

If you have paid within the time given, no further action will be taken but you should avoid missing further payments or you will get another letter.

This budgeting resource could help!

If you cannot afford the missing payments, speak with the company to see if they can offer a repayment agreement over many months.

Or consider a debt solution!

You don't have to agree on a repayment plan directly with your creditor. There are alternative debt solutions available that could help you get out of debt cheaper and/or quicker.

There's something for all situations, such as:

Debt Management Plans
Debt Relief Orders
Individual Voluntary Arrangements
Bankruptcy

Some of the above can be organised for free by contacting a charity, or you may need to engage paid-for services of a debt management company.

What is your credit file?

Everyone in the UK has a credit rating which provides their financial history for the previous six years.

The activity makes up a credit score, which is accessible to any lender or creditor that you have applied to for new credit.

Based on your score, lenders can accept or reject your application. It is also looked at by banks when you apply for a bank account and by mortgage providers.

Where can I look up my credit file?

Credit files can be found on a credit reference agency website. Only use one that is authorised and regulated by the Financial Conduct Authority, such as Experian.

The companies offering this service usually offer a free trial where you can consult your credit report for so many days but then have to pay thereafter.

They are useful if you want to access your credit file for free just to check what's there and look for mistakes, and then cancel straight after so you never have to pay.

Is a default reported on your credit report?

A default notice is just a letter and that itself is not reported on your credit file.

However, the missed payments will be recorded and if the account does default – i.e. you do not pay or make arrangements to pay after receiving the letter – this will also be reported on your credit report.

The company will file a default on your credit file themselves.

A default on your credit file shows other lenders or a bank that you miss payments and could make it harder to secure a bank account, loan or credit card.

Can I ask a company to remove a default?

There are times when you can ask creditors to remove a default. Common reasons to make this request are administration errors causing mistaken identity or when you contest the default.

You can learn the ways you could contest the default further below.

When can a default be removed?

There are two main ways a default can be removed from your credit file:

There has been an error
Sufficient time has passed

Default on credit report error

It's important to check your account because errors do occur. If you see a default that you are sure is a mistake or you want to contest, you should bring the matter up with the lender that placed it there.

Reasons to argue a case include:

The lender didn't try to collect the payments
Mistaken identity and admin errors
You were in arrears by fewer than three months
Duplicate defaults (usually added a second time by a debt collector)
The debt was Statute Barred

If they do not agree to remove it for whatever reason, you can then ask the credit reference agency to do it for you – providing evidence.

Removing a default can be a tiresome process and you may want the help of Step Change or Citizens Advice as you go through the process.

Sufficient time has passed

Defaults will only stay on your credit file for six years from the date it was added. Once these six years have passed, the default will automatically be deleted.

If you catch up with your monthly payment, the default still won't be removed until the six years have elapsed.

If the default was added later than it should have been, you could ask for it to be adjusted so it falls off your credit report at an earlier date.

"Suppressing" a default

In situations where the creditor has gone bust and they no longer respond to your or the credit reference website's request, you can then ask those credit reference agencies to suppress the default.

Although this technically doesn't delete any related defaults from your credit file, it does hide them when lenders complete a credit check, improving your chances of securing a loan or other credit.

It is crucial that you only try this once the lender has gone bust.

Can you pay to clear your credit history?

You might come across adverts and websites for "Credit Repair Companies" or "Credit Fixers". Making payments to these companies is not worthwhile. It's best to keep your money in your pocket and avoid all of these businesses.

None of them have a secret loophole to get credit reference agencies to delete defaults and debt. All they do is provide information and services that you can do yourself.

Does your credit score go up when a default is removed?

When a default is registered on your credit report, it reduces your score. Thus, once a default is removed, no matter why it was removed, your score will increase.

But having a default removed is not the only thing you need to consider to improve your credit score. You can build it up in other ways.

You should also keep in mind that the negative impact of having a default will dwindle as time goes on. Lenders will put less scrutiny on a default on a credit report from a date over five years ago than they will one that was added last month.

Improve your credit score after default

If you have had a default and are having no good luck getting it removed, you can always concentrate on improving your credit score in other ways.

Here are some of the best ways to improve your credit report:

#1: Check for other credit report errors

When you log on to Experian or one of the other agencies, don't just look for default errors. There could be many other types of errors on your credit file, such as an outstanding CCJ or maybe a credit card you never knew you still had.

#2: Register to vote

Simply by adding your name to the electoral register you can increase your chances of securing credit. It allows lenders to verify your identity easier and can subtly improve your rating. You can register to vote online or by sending a letter.

#3: Is your credit file linked?

Your credit file may be linked to someone else's, possibly an ex-partner. If it is and they have a negative credit score, your own credit file will be suffering too.

You probably split the furniture, but have you split your credit report yet?

#4: Reduce your credit utilisation

Striking a balance between borrowing and using what you have been given is crucial. The technical name for this is your credit utilisation, i.e. how much of your credit are you utilising. Try to keep it low and around 30% at any one time.

#5: Move less

You can still grab your running shoes; what we mean by move less is move home less often. Creditors feel comfortable when you appear to be settled and do not up and move frequently.

They believe your financial situation is more stable when you stay put.

Can a default stop you getting a mortgage?

There's no doubt that having a default can make it harder to secure a mortgage, but it is your overall credit score and history that will determine if you can secure a mortgage or not.

During your application, it is always better to be open and honest about any previous defaults.

We've also covered how credit card debt affects a mortgage application!

Contact a registered debt charity for more!

For more help understanding credit scores and default notices, why not speak with a registered charity? If you have received a default letter from your lender, help is just a call away.

And we are always here offering free blogs and guides on the most asked questions to do with debts!

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years' experience in the industry, including 6 years in FCA regulated companies. Read more