A reader asked if it is right that he has to pay a debt that he can’t see on his credit record? Many people think that checking their credit record is a good way to get a complete list of their debts. And they look forward to a defaulted debt disappearing from their credit record because then they don’t owe the money any more. Unfortunately neither of these myths is true!
What debts show on a credit file?
Your credit records are details about your borrowing and repayments over the last six years that are provided by some lenders.
Lenders want these records so they can make good decisions about future lending. They are more interested in recent data and they have agreed they don’t want to know about information from more than six years ago.
If you are paying a debt normally, it stays until you have repaid it fully leaving a zero balance then it drops off after six years. If a default has been marked on a debt, then the debt disappears after six years but the debt still legally exists – it has only gone because the problem was so long ago that future lenders don’t want to know about it any more.
Debt details are only given by some lenders. Almost all commercial lenders such as banks and credit cards report data. but sometimes they only report to one or two Credit Reference Agencies, not to the three UK CRAs: Experian, Equifax and Call Credit.
You may have other sorts of debts that don’t show on your credit record at all – rent arrears, council tax arrears, benefit overpayments, what you owe a builder for work he has done etc. These are all legal debts even though they don’t show on your credit report.
So the report from one of the CRAs that you are looking at is not a complete list of your debts. If you get reports from all three CRAs (see The best way to check your credit records for how to do this) that is a better combined list but there may still be debts that you owe which aren’t on any of them.
What debts should you pay?
Almost all legal debts are “enforceable”. This means that the creditor can take you to court, usually for a CCJ. And after that the creditor may be able to send in bailiffs, get money deducted from your wages (called an “attachment of earnings”), get a charging order over your house or even make you bankrupt. Most of these actions are rare or very rare, and the creditor has to go back to court again first so you can challenge them, but I am listing them here so you know what “enforcement” means … basically if a debt is enforceable then you need to make arrangements to pay it.
There has to be a specific reason why a debt is not enforceable. The common ones are:
- if you are bankrupt, in an IVA or a Debt Relief Order. Here there is still a legal debt until your insolvency ends and the included debts are wiped out. They will be reported on your credit file, but during the insolvency period the creditors are not allowed to take court action or try to recover the money.
- the debt may be “statute barred”. This is complicated – see Questions about Statute Barred Debt for details, but a quick summary is that most debts become “statute barred” when you haven’t made a payment to it or acknowledged it in writing for more than six years in England and Wales. If a debt is statute barred, this is your defence if the creditor tries to take you to court. Most statute barred debts do not show on your credit file because they defaulted more than six years ago..
- there may be some problem with the debt documentation – for example a creditor may be unable to produce the Consumer Credit Act agreement – see National Debtline’s Credit Agreements – getting information factsheet for details. Here the debt may be reported on your credit record as it is still a legal debt but it is not enforceable.
So what debts do you have to pay that aren’t on your credit file?
Bringing together the above information, there are two common types of debts which are enforceable – so you have to pay them – but they don’t show on your credit file:
- debts that you defaulted on more than 6 years ago where you have made a payment in the last six years These debts will have dropped off your credit but they are still enforceable as they are not statute barred. If you stop making payments or don’t talk to a debt collector who contacts you about the debt, you may get a CCJ which will reappear on your credit record and also bailiffs or other enforcement problems. In the third quarter of 2016, more than 250,000 CCJs were registered, up over 30% on a year ago.
- creditors that don’t report to the credit reference agency You can’t assume that if you are contacted about a debt that isn’t on your credit record this is an error and you can ignore it. You need to ask the creditor to Prove the debt and if the creditor does this AND the debt isn’t so old it is statute barred, you will have to make arrangements to pay.
If you are certain your debt isn’t enforceable, then you don’t have to pay it. The difficult part here is knowing whether an old debt is statute barred. If you aren’t certain, I suggest talking to National Debtline and seeing what they say.
What if you can’t afford to pay those debts?
It isn’t safe to ignore a debt because you can’t pay it. You can either try to come to an arrangement with the creditor or get advice on your full financial situation. The more debts that you have, or if you have any priority debts, the more important it is to get proper advice.
There are a range of good places that can help, depending on the sorts of debts and whether you would like telephone or face to face advice.