A reader asked if starting to pay a defaulted account will help his credit score. The simple answer is No!
But there are very good reasons why paying defaulted debts will improve your general credit situation, making it easier for you to get a loan, a mortgage or a credit card in future. That credit rating number isn’t the only thing that matters!
To start, it’s good to know what your credit history is now by checking all three credit reference agencies.
Six years is the important date
A defaulted account will drop off your credit record six years after the default date.
It doesn’t matter what happens after the default – whether you pay the account in full, start paying it, agree a partial settlement or don’t pay anything at all, the account will still be deleted after six years.
So find out what all your default dates are. If you think one is too late, read What Should the Default Date Be? which explains how to get an incorrect date changed.
Your credit record gets better after six years unless…
This may sound as though your credit score will get a lot better after six years even if you pay nothing. This is correct, but there is one big exception – your creditor may take you to court and get a County Court Judgment (CCJ). This CCJ would then stay on your file for another six years. Most lenders regard a default as bad but a CCJ as worse.
You may be hoping this doesn’t happen, unfortunately after five years and a few months, a debt collector may contact you and threaten court action if you don’t set up a payment arrangement. If you have moved and not told the creditor your new address, you could get a CCJ without being aware of it.
If this doesn’t happen and the defaulted account drops off, then your credit score will improve immediately. How much will depend on what else is on your credit record – if you have a lot of other debts still showing you may not notice the difference until the last ones go.
Older defaults are less bad for your credit score
Your credit record starts recovering from a default before the end of the six years. I asked Experian how their credit rating calculations changed as a default gets older. The following numbers show what happens to Experian’s credit score if there is only one default and if nothing else changes on your credit record:
- in last 2 years – 350 points
- 2-4 years ago – 250 points
- 4-6 years ago – 200 points.
In practice there is almost always something else changing every month, so you shouldn’t expect to see those exact numbers but they give a feel for what is going on. For some more examples of how much different things affect your credit score, read How much will my credit score change if… ?
Your credit score doesn’t improve faster if you settle the debt, but…
Most people will expect that if they repay a defaulted debt their credit rating will suddenly improve. This doesn’t happen. So you may wonder why you should bother!
There are two very important reasons to start to repay a defaulted debt.
- if you are making payments a lender is a lot less likely to go to court for a CCJ. A CCJ is much worse for your credit record than a default, and it would be on there for another six years.
- lenders all make their own assessments, they don’t just use a credit score. Many lenders regard a settled default, as much less of a problem. So by repaying a defaulted debt you are more likely to get approved for a new loan.
That last point is especially important for mortgage applications. You are very unlikely to get a mortgage at a reasonable rate if you have unpaid defaults. The sooner you can repay them the better.
Each lender sets their own rules, but a current rule of thumb is that if all your defaults are over three years old and they have been repaid for more than a year, it’s worth talking to a broker about whether a mortgage is possible.
This also applies to CCJs
Exactly the same applies to CCJs. If you pay them in the first month the CCJ will drop off completely. But after that if you repay the CCJ and get it marked as satisfied, your credit score will not increase at all.
Again there are good reasons to repay a CCJ – you won’t get hassle from bailiffs or money being taken from your wages. But you are stuck with the bad effect on your credit score for 6 years.
Is it worth making low payments to a defaulted account?
Low payments won’t make much of a dent in your debt, even if interest and charges are frozen. There are positive reasons in favour of token payments – once agreed with your creditors, they will reduce the hassle you get and also make it less likely that you will get a CCJ – but they aren’t going to improve your credit record or make it more likely you will get more credit.
If you expect your situation to improve, then low payments are a good option, but if this seems unlikely then you should probably look at what your alternatives are.
Will a consolidation loan help?
If you have poor credit, it is very rare for a consolidation loan to help.
Using it to repay some defaulted debts or debts with payment arrangements is not going to improve your score. And the loan is going to be expensive – it’s usually better to get a payment arrangement to repay defaulted debts as then no more interest is going to be added.
And getting a guarantor loan to consolidate debt can be a major problem – if you run into difficulty you will then be desperate to protect your guarantor.
It’s better to talk to a debt adviser before taking a consolidation loan.
Conclusion
So although the answer to the reader’s question was No – repaying defaulted debts won’t improve his credit score faster, this isn’t really the full picture. A better reply is:
Your credit score will improve gradually as your defaults get older. This doesn’t speed up when you repay a defaulted debt, but some lenders are only likely to lend to you once defaults have been paid. And starting to repay debts makes a CCJ much less likely, which would make your credit record worse.
Consolidating with bad credit?
Can you get a mortgage with your debts?
FAQs on statute barred debt
Tim Min says
Hi Please help as I’m perplexed as to why the Trans Union credit report is so low? Both my Experian (963/1000) and Equifax (937/1000) credit scores are rated ‘Excellent’ and have been for some time, and even my affordability score for Equifax is 77/100, but TransUnion (544/710) is rated ‘Very Poor’ ? and just doesn’t move?? I’ve been over and over the data they have on me but its just the same as the other 2 agencies? I don’t have any CCJ’s or other public records, I’ve been in credit with my current account for a few years now? I’ve paid off one credit Card and don’t use it, and I’m in the process of paying off a Nationwide one and its now 43% of the available credit. I have a mortgage (as do most people) its currently a capital and interest payment and outstanding balance is 178K on a house that it valued at 400k. I have a regular income and have done since 2019 and my bank account shows that there are wage payments from from my Company regularly on a monthly basis of between £5000-10000 per month. I also haven’t missed any credit payments for years now?
Tim Min says
So recorded on all 3 credit reference agencies are 4 default records, this was a really difficult time in my life. In 2019 I was without work and I was not living in the family home either, so there was a point in time where my mail was not being picked up and I missed the default notices, this resulted in the Halifax, and Cahoot, defaulting the accounts I had with them.To put things right, For Halifax and Cahoot, I paid off in full the money that was owed to them, this can be seen in the credit ref’s history and those accounts are closed, I also had a payment plan setup to clear the balance on the Nationwide credit card, and as described above this is now 43% of the available credit with them. In 2019 I was without work and I was not living in the family home either, so there was a point in time where my mail was not being picked up and I missed the default notices, this resulted in the Halifax, and Cahoot, defaulting the accounts I had with them. To put things right, For Halifax and Cahoots, I paid off in full the money that was owed to them, this can be seen in the credit ref’s history and those accounts are closed, I also had a payment plan setup to clear the balance on the Nationwide credit card, and as described above this is now 43% of the available credit with them.
Tim Min says
What happened in 2019 was an unforeseen breakdown in communication, however, the impact of this should have reduced on my credit records (its over 4 years since any default) the impact has reduced with the other 2 credit agencies, but with TransUnion, nothing changes? to be honest, my current personal financial status is better than it has been ever in my life, but the TransUnion score is preventing even my wife getting a new phone on contract, simply because she is associated with me. How can the TransUnion score be showing me right at the bottom of their scale and the other 2 credit ref agencies I’m right at the top due to the massive work I’ve been doing to improve my financial status. In short, I have a regular ‘Good’ wage 5-10k a month, I have a mortgage with LTV less than 50%, I have a credit card with a limit of £1400 and zero balance, I don’t have an overdraft, I don’t have any loans, or outstanding credit (other than Nationwide’) I’ve lived in the same house for 18years, I’m on the electoral register, I have no CCJ’s or bankruptcies, I’ve had no late or missed payment for some years now, and I’ve had no searches, (other than the soft searches) for years and years, my wife is in full time employment earning 50k a year. I just think for some reason TransUnion are unfairly penalising me, when the other 2 agency’s determine that work has gone on to rectify a problem, any help is greatly appreciated.
Sara (Debt Camel) says
First you need to ignore the Very Poor and Excellent labels the CRAs use. Your TransUnion Score is out of 710 is the equivalent of about 812 out of a 1000. Equifax would label a 812 score as Excellent and Experian would label an 812 score as Fair. So yu can see these labels cannot be compared. And no lenders care about the labels.
Obviously however your TransUnion score is significantly lower than the other two. But with 4 defaults on your credit record, I would say the Experian score looks unusually high rather than the TransUnion score being unusually low.
The credit card you have cleared – were there any payments problems at all on that? And were there any on the Nationwide card you are clearing?
Abbie Hirst says
Hi, I have 5 credit cards that defaulted back in 2020
and have been sold to debt collection agencies, which I am paying back a small cost each month. Will these defaults still disappear after 6 years if they have been taken over by an agency? They are listed on my credit file with default dates.
Sara (Debt Camel) says
yes they will.
But at that point you have to carry on paying them, see https://debtcamel.co.uk/debt-not-on-my-credit-file/
Wesley says
Hi Sara,
I have two defaults from early 2020. I’m focusing on repaying as much of the one that remains with the credit card company to try and avoid them selling the debt on. The second default was sold to a collection agency in 2020 and I’m making the same payment as I made previously (if I carry on making the same payments, I will not have settled the debt before it drops off my credit report). My question is whether the collection agency can (1) get a CCJ if I am making payments and/or (2) sell my debt on again the closer it gets to the 6 year mark and whether I would be wise to try and up these payments as soon as I can? I am not keen on trying to go down the final partial settlement offer route.
Thank you for your website, it is a big help.
Sara (Debt Camel) says
I’m focusing on repaying as much of the one that remains with the credit card company to try and avoid them selling the debt on.
Why? Debt collectors are often easier to deal with and are much more likely to accept a settlement offer than the original lender.
1) get a CCJ if I am making payments
Yes. But they won’t usually if you have shown you are paying all you can afford
2) sell my debt on again the closer it gets to the 6 year mark
yes but why would you care?
and whether I would be wise to try and up these payments as soon as I can?
the sooner they are cleared the sooner you can move on
I am not keen on trying to go down the final partial settlement offer route.
Can I ask why?
Wesley says
Thanks very much for your responses.
“Why? Debt collectors are often easier to deal with and are much more likely to accept a settlement offer than the original lender.”
This is mostly because the debt collector reports a 100% utilisation no matter what I pay down while the credit card company still reports a reduced utilisation every payment. Not awful, but not ideal as I rebuild my credit worthiness.
“2) sell my debt on again the closer it gets to the 6 year mark
yes but why would you care?”
Both the second credit card default and when they sold it to the debt collection agency gaining of the default are on one of my credit reports (2 defaults recorded when I feel it should be just 1?). I have tried to have one of the defaults removed but haven’t been successful so far. So I’m just very wary of anything getting sold on again. Or should the debt drop off anyway in the usual timeframe?
“I am not keen on trying to go down the final partial settlement offer route.
Can I ask why?”
For sure. I have to remortgage in a couple of years and I would prefer no partial settlement recorded in case they see I don’t settle my debts completely. Is that the wrong way to look at it?
Sara (Debt Camel) says
2 defaults recorded when I feel it should be just 1
this is normal. But importantly only 1 of the defaults is counted in the credit scoring system. It doesn’t harm you at all.
Or should the debt drop off anyway in the usual timeframe?
Yes it will. Having a debt sold should not change the default date. It will still go after 6 years.
I have to remortgage in a couple of years and I would prefer no partial settlement recorded in case they see I don’t settle my debts completely.
See https://debtcamel.co.uk/dmp-partial-settlement/
But
1) your situation is that you will not have cleared all the defaults by that point – correct? That is MASSIVELY more of a problem for a remortgage than having cleared them with a partial settlement.
2) if you only need a new fix from your current lender, not a change to the amount or term, then if your lender is a normal high street lender they will not check affordabilit or your credit record, see https://www.gov.uk/government/news/mortgage-lenders-commitments-to-borrowers
Wesley says
Yes it’s correct it would not have cleared by then, I did not realise a remaining default was worse than a partially settled one and I will now prioritise trying to partially settle both defaults. Thanks for all your advice Sara, I appreciate it.
Sara (Debt Camel) says
I have asked an expert at Experian about your point that the credit card company reports a reduced utilisation every month, because it sounded odd to me.
I am told that Experian does not use any “utilisation” numbers after a default has been recorded. So there is no difference to your credit score whether the debt is sold or not.
Wesley says
Thank you Sara, I really appreciate your thoroughness. I’ve checked my Equifax (ClearScore) and Experian (MSE Credit Club) reports and neither are reporting the sold on default in that way. It seems to be CreditKarma (TransUnion) who are doing this; though perhaps that is just CreditKarma trying to encourage me to take further credit through them?
Sara (Debt Camel) says
it could well just be the way CreditKarma reports.
Or it could be an oddity in the way TransUnion scores. It would be silly for TransUnion to count a defaulted account as helping your utilisation as you can no longer spend on that account so the credit limit is not available to you. But I suppose that doesn’t mean TU aren’t doing this.
Kimberly D says
I have a default from 2017 and is the account was settled and the account closed in the same year. It is finally coming to the time it comes off my credit score. Will I gain points when it comes off?
Sara (Debt Camel) says
See https://debtcamel.co.uk/credit-score-change/. But it depends on what other problems are still showing on your credit record. The more other problems there are, the less getting rid of just one of them will help.
Maureen says
I have a default of £6000 from 2009 which I have been paying £5 per month. I’ve not missed any payments on it and settled it partially at an agreed £1800 two months ago. I’m in the process of getting a mortgage. The company is asking about this and evidence of settlement which I’m in the process of doing. Will this affect my chances of getting a retirement interest only mortgage. I have a substantial deposit and excellent credit score and no missed payments for 13 years. No ccj’s either. I have been approved in principle.
Thanks
Sara (Debt Camel) says
Retirement interest only mortgages are a specialist are and I don’t think there is any point in me guessing this.
Who was the original lender?
Maureen says
MBNA who set up the £5 per month payment plan. They then passed this to Westcott who were subsequently taken over by Cabot. The payment plan was reviewed over the years but remained at £5 which I paid by DD. I know I’ve been stupid in not settling this earlier.
Sara (Debt Camel) says
Well if this means you are Rejected for the mortgage, then send a complaint to MBNA asking them to backdate the default to 2010. It will then immediately fall off your credit record.
Maureen says
Thanks for that suggestion but It’s not on my credit record , never has been for some reason. It showed up on my bank statement and was queried from there.
Sara (Debt Camel) says
Ok, then if this applicais rejected, you can Apply to a different lender in a few months time as most lenders only go back 6 months in the statements. If you went through a broker they should have explained this to you.
Maureen says
Thanks Sara. Fingers crossed this application will be accepted otherwise I will take your advice.
Kind regards
Neshet says
Hi Sara,
I am in £20,000 of debt mostly credit cards and pay pal.
All my cards are In default. I am studying a masters in nursing and within two years I should have a full time job and be able to pay my debts off but they some of them are at least more then 4 years old. I am making small payments each month but recently noticed no my minimum payments have been not made on a few of the Accounts, as I set up a stand order they should just continue anyway, so I don’t have any CCJs but I will need to contact all agency’s Tomorrow to find out why my payments are not showing on my credit file. Sorry to go on but do you think I would be better off declaring bankruptcy? Or should I continue making small payments? I am hoping to apply for a mortgage in five years time what are my chances if I declare bankruptcy?
I am only I think two/three years away from my debts bring 6 years old. There is also one more question regarding PayPal they never replied back to my messages and never asked for any payments would you know why? Also how would I improve my credit score I only have one band : (
Sara (Debt Camel) says
There is an alternative to bankruptcy called a Debt Relief Order – I suggest you talk to National Debtline on 0808 808 4000 who can advise on all your options and talk through the pros and cons with you.
I think you have to be very realistic about your chance of a mortgage on 5 years. That will have required to you to repay all the defaulted debts at least a year before an application AND to have saved up a deposit. If you need a 20k deposit, that means being able to clear debt and save at a rate of over £1000 a month.
How old the debts are isn’t important. If the defaults will soon be over 6 years ago, then they will drop off your credit record then but still have to be cleared at least 6 months before a mortgage application as the mortgage lender will see the payments to them on your credit record.
You have no chance of significantly improving your credit score until the defaulted debts drop off. Don’t be tempted to get “credit builder” cards, they will make little difference and all too opften just result in more debt.
Neshet says
Thank you so much for your invaluable advice Sara.
Rosh says
Hi,
I have a default on an account from 05/19.
I was going through an awful place mentally having lost a family member and was on a payment holiday for my credit card due to chronic depression and was under the care of the MH team. Following a break up I moved out of my house. I contacted my banks with my new address and when I phoned up my bank a few months later to discuss my payment holiday they said that that had ended, they had tried to contact me through letters/phone calls but had no response and my account was defaulted. I was very shocked as genuinely had received no contact with them. They had my current address on file and I had certainly received no post of phone calls from them.
I have since tried to contact them to start arranging repayments but they have no record of this particular account so I have no idea how to start making repayments and I have received no communication with anyone.
Even though I feel this default was very unjust as I was on a payment holiday and there was no communication to suggest otherwise, I am aware that it has been several years and I am anxious to start paying back something – even though I do not have a lot to give. Any advice on what on earth to do please?
Sara (Debt Camel) says
A default drops off your credit record after 6 years, which will be in 2025. A payment arrangement marker stays on for 6 years after the debt has been settled, which will be a lot longer, probably 2030 or later. So although a default is worse, it is all over much sooner.
Also technically a lender is allowed to add a default when a debt is in a payment arrangement when it gets to being 3-6 months in arrears.
So although it sounds as though their communication was very poor, especially if they were aware of your MH problems (were they?), at the moment it seems best to ignore the issue of them not telling you about the default.
What is your current financial situation like? Do you have other problem debts? Any arrears on important bills?
Do you mind saying how large this debts is?
Rosh says
I am worried as I’m not sure how to begin making repayments as the bank doesn’t seem to have the information anymore.
They were aware of the circumstances – to the point where they had phoned me a few times to see how I was doing. I changed my address straight away and received no contact from them to say the payment holiday was coming to an end/that it would default otherwise I would’ve made the minimum payments. I know I don’t have a leg to stand on to fight this but I don’t want to end up getting a CCJ.
I’m not in a brilliant place financially as rent has gone up. I am a teacher and have an additional weekend job to try and boost my income. The default is for £4000 and I have around £5000 of other debts but I have been making regular payments/overpayments to all besides the default. Most of the debt is from needing to buy food ,etc. on credit cards to survive at university and some was my exes expenses. I am up to date with all utilities, rent, council tax, etc. and have never missed a payment.
I have paid off around £4000 of debt in the last few years and really want to sort this default somehow as my credit score is just depressing! Plus the other debts are high interest so I am making overpayments as much as possible but even with two wages I am very much living in my overdraft due to making these payments.
I am at the stage of starting to think of houses with my partner and although we have a strong combined wage and he has good credit, my score is naff and I don’t want to ruin our chances.
Sara (Debt Camel) says
1) you do not want this default changed to a payment arrangement.
As I said in my previous comment, with a default your credit report will be clear in 2025. Although you may feel upset at the way it was added, this is now the best option for you. So if you talk to the bank now or in the future, do NOT ask them to change the default to a payment arrangement.
2) you have other expensive debt – clearing that is more important
You are not being charged interest on this and you are not even being asked to make a payment arrangement.
And your credit score will not improve if you start to make payments to this. – it is a very stupid system, but those are the rules.
3) it is possible you may never be contacted about this debt again
I don’t like suggesting this to people, as for most people hoping that a lender has fogotten about you is almost certainly going to fail.
But in your case the lender is a bank, they knew you had mental health problems, and they havent contacted you for years, and seem to have lost the account. So is possible that they decided the debt was uncollectable and you will never be asked to pay it. This isn’t certain, and I can’t say how likely it is, but it is a definite possibility.
4) So where does this leave you and your hopes for a mortgage?
It seems to me that a practical way forward is to concentrate on clearing your other debts now. And if the bank or a debt collector pops up and asks to you pay this debt, well at least the other debts will be lower so it will be easier. Once the other debts are cleared, you can start saving up some money that you could pay to this debt in case you are contacted.
If you have no contact before May 2019, your credit record will be clear. Even if you can repay this debt in full immediately, your credit score will still be damaged until May 2025. What timescales are you thinking of for a mortgage?
You should make sure that the bank has your current address.
Michelle says
I have defaulted on my account in 2021, but the account status shows open with defaults recorded each month? The original date when you look at the record states 2021. Why is the account still shows open when it’s defaulted? Why is it showing defaults each month? Thanks
Sara (Debt Camel) says
The account shows as open as it has not been settled.
The extra defaults each month look dreadful, but only the first D is counted by the credit scoring algorithm. This is just what happens with defaults.
William says
Hello
I have a credit card default from 2020 when I was originally furloughed then became unemployed due to vulnerability during the pandemic. The credit card company sold the debt on to a debt collector who wrote the debt off after my medical evidence was produced. This debt still shows on my bank account credit file as a default under the name of the original card lender. Is this correct or should it be showing as a written off debt?
Thank you
Sara (Debt Camel) says
The record for the original lender – does this show as having a balance owing?
Is there also a record for the debt collector?
Richard says
Hi Sara,
Hope you’re well.
I first defaulted on a loan back in October 2018 and enrolled in a DMP shortly after having been made redundant during that period. My understanding is that at around October 2024 this would have drop off my credit file, being six years from my first default. In July this year, I was fortunate to receive some money which I used to settle this loan with the company, and it has now been marked on my credit file as such. However, I noticed with both credit agencies (Transunion/Experian) that they will continue to report this until July 2029 (six years from the date of settlement). My question is, have I made a mistake? as if I had just waited until October next year, or shortly after, this would not have shown on my credit file, and now by paying it off early, it will show on my file for another six years, effecting my ability to apply for a small mortgage in a few years time. I initially thought adverse accounts recorded get removed from the date of first default and not another six years added from the point of when settled/satisfied. Any clarity appreciated.
Sara (Debt Camel) says
It sounds as though the lender never added a default to your credit record, so it showed as a payment arrangement or missed payments. You need to ask the lender to add a backdated default, see https://debtcamel.co.uk/debt-default-date/
Hayley says
Hi, I have a default on an unsecured loan.
The lender recently contacted me as they realised they were charging interest when they shouldn’t have been when I was using a debt management company so instead of the 20k I owed it is now 16k (to an address I asked them not to use due to privacy issues). They have also since written to advise that my debt will be sold onto a debt collection agency if I don’t get in touch by 18th October (this was sent to the correct correspondence address).
The default is approximately 4.5 years old.
I did write to the lender over a year ago as I believed they irresponsibly lent the monies to me and at the time I suffered with depression and also couldn’t afford the loan if they looked at my finances, they would have seen I was regularly consolidating debt and increasing loan amounts etc..
I tried to make them a settlement offer. This was rejected.
Do you think it’s worth making another offer? Or wait until it goes to the DCA and maybe make them an offer? I can now afford to pay a substantial amount to clear this debt. Or shall I just set up a payment plan until the default is 6 years old?
I don’t want to risk a CCJ and would like to at least try to improve my credit score in the hope that I’ll be approved for a mortgage in the future.
Thank you.
Sara (Debt Camel) says
Can I ask which lender this is? And how large an offer you made them?
What is your realistic timescale for applying for a mortgage?
Hayley says
Hi, the lender is TSB and I would be looking to potentially apply for a mortgage with someone who already has a mortgage within the next 3 years or so
James says
Hi I had a joint loan with a partner who entered into a trust deed she was advised it would not affect my credit rating. But the bank put a default on the loan even though I have been paying the loan payments in full myself and never missed a payment . Now my credit rating is bad and I can’t get any credit .is it possible to have this default removed from my credit rating?
Sara (Debt Camel) says
she was advised it would not affect my credit rating
I don’t think you should have been told that – as you had a joint product, your accounts would be linked and this would be visible to creditors checking your records.
the bank put a default on the loan even though I have been paying the loan payments in full myself and never missed a payment
this does not sound right though. I suggest you send the bank a complaint – if you tell me which bank i can give you an email address for complaints. Say no payments have been missed so it is unreasonable for a default to appear on your credit record – ask for it to be removed.
Let me know what happens?
James says
It was royal Bank of scotland loan
Sara (Debt Camel) says
email customer.relations@natwest.com, Put “Complaint about credit record” as the subject line.
Mike says
Hi ,
During 2020 , I lost my job and went through a very difficult time mentally for matters I do not want to disclose on here. I had a student/graduate account with RBS with an overdraft limit of £2000. It is at this time RBS decided to close my account because they have made a “commercial decision” and therefore demanding the £2000 back ASAP. During this time I made a big mistake and ignored all the letters as I wasn’t in the best position mentally and financially. RBS subsequently put a default notice onto my credit file. During the first year of the default account I managed to pay £700. After this I have not paid anything for the past 2 years. So i currently owe them £1300.
I am looking to get a mortgage within the next 1/2 years. I’ve had very bad credit in the past but i am trying to build it back up. My question is firstly if I do not pay anything else on the account , will the default become a CCJ and then this would last another 6 years ? I DO NOT NEED THIS AGAIN!!!!
My second question does the default account need to be settled for at least a year before i should apply for a mortgage ?
Should I even touch the default or just hope it disappears after 6 years? What’s the best approach? Now i am in a position I can pay it back in full if required.
Thanks in advance !!!!
Sara (Debt Camel) says
If I do not pay anything else on the account , will the default become a CCJ and then this would last another 6 years
A default doesn’t automatically become a CCJ but it’s very likely that RBS will at some point sell this debt and the debt collector that buys it will go for a CCJ if you do not set up a monthly payment arrangement.
The chance of this debt just dropping off your file and also being statute barred so you can’t get a CCJ is low – and this will be even smaller if your credit record is improving!
My second question does the default account need to be settled for at least a year before i should apply for a mortgage
Yes unless you are happy to get an expensive “bad credit mortgage” which I do NOT recommend. You cannot be sure you can remortgage cheaply in a few years. Many were badly caught out by this in 2009-12. And many more are finding this out in 2023 at the moment.
The longer this default has been settled, the more high street lenders may be prepared to consider a mortgage application. I suggest you clear it straight away.
(I can’t tell from what you have said if you have any reason to complain to RBS about how you were treated in 2020. But if you think You do, you should still settled the balance now in my opinion. )
Catriona says
Hi
I have a defaulted account on a Sainsbury’s account . For 3 years Sainsburys have sent this now to a collection agency . I pay 50 pounds a month do I have to keep paying and if I pay what happens after 6 years . I don’t want court etc to afraid . Also can you advise what you should I do about the debt collection agency ?
Sara (Debt Camel) says
This was a loan? How large is the current balance?
Do you have other debts as well?
Catriona says
It’s 1400 k and yes I have other debts but managing to pay them . I’m a nurse this one was forced into default after Covid
Sara (Debt Camel) says
ok have Sainsburys sold this to a debt collector or just passed this to a debt collector to collect on their behalf?
£50 a month will clear this in just over 2 years. Is the £50 affordable?
Catriona says
They have been passed it on . 50 pound a month over 2 years sorry I missed a 0 it’s 14000 apologies
Yes 50 pounds ok but it’s defaulted what way does this work then if I haven’t paid it all off
Sara (Debt Camel) says
they have been passed it on
that isn’t clear. Who is the debt collector? what did the letter from them say?
ok £14,000 is more of a problem. Was this a loan? how long ago? Were the repayments too high from early on or was it OK for a while?
Your other debts – how large are they?
Catriona says
Hi
I have 7k in other loans and then 6k in credit card . My default loan is approximately 14000 this is defaulted from . The debt collected is PDCS. It’s in default from 2020 I think . They told be I could take a break I did and extended it and when I went to return to payment they defaulted me . I don’t know what to do next .
Sara (Debt Camel) says
Can I ask what the interest rate was on this loan? What was it for? I am interested in whether you may be able to make an affordability complaint about the loan.
The other loans – what interest rate? Are you paying Interest on the credit card debt?
A default hurts your credit score. It doesn’t mean you are about to be taken to court providing you keep paying. But £50 a month is going to take decades to clear the debt…. Will you be able to increase this amount when the other loans end?
Are you still Using the credit cards? If you are, cam you stop?
Catriona says
Hi
I don’t know how much interest on this loan but I can find out . The other loans are at 21 precent . Credit card already have stopped using . What happens to my defaulted loan after 6 years ? I will find out the interest in defaulted loan .
Thanks for your help
Sara (Debt Camel) says
What happens to my defaulted loan after 6 years ?
It drops off your credit record but is still legally owed. If you stop paying you can still be taken to court at that point.
So there is little point in trying to get through to the 6 year point – your situation doesn’t change much at that point. i think you should talk to a debt adviser about your options for all of your debts now – phone national Debtline on 0808 808 4000.
Jim says
Hi Sara,
Thanks for all the help and everything you do!
So my credit report is pretty poor and I’m wondering is there anything I can do to improve it in the next year. I have 7 defaults all between 02/19 and 12/2019. 5 of them have been F&F settlements with partial settlements and I’ve 2 more still with balances of £1036 defaulted 04/2019 and the other for £1695 defaulted on 10/2019. I am currently set up paying a small amount off each at the moment.
Would loqbox be any good to me at the minute or do you think a credit card is possible now?
I’m hoping to have the 2 current debts paid off in 2024, not sure whether to pay them in full or make offers for partial?
I would like to be getting a car on finance next year if possible then looking at a mortgage sometime after all my defaults are fully gone, the only things I have now is phone contracts, one for me and my daughter. Mine has about £400 remaining and my daughter over £1000, never missed payments on these.
Thanks in advance for any help
Sara (Debt Camel) says
How much spare money do you have to save a month?
The defaulted debts have been sold to debt collectors?
Jim says
At the minute not much, but hopefully next year I can have at least 500 spare a month. I’m waiting on Medical’s to get a better job at the minute.
Yes both debts are with Cabot and have been offered different settlements over the years.
Thanks
Sara (Debt Camel) says
There is no reason to settle these debts in full, partial settlements will not harm your credit score.
At the moment it is more important to get these debts settled asap than to start saving using LOQBOX. You could get a “credit builder” card if you totally trust yourself not to always rely in full each month – not only are their interest rates excessive but running a balance when you have a low limit can actually make your credit score worse.
If you can put off applying for car finance until the debts are settled that will help. Even better save up that £500 a month when the debts re settled and buy a second hand car – car finance can make it harder to save a Deposit for a mortgage and will reduce the amount a mortgage lender is prepared to offer you.
Jim says
Thanks so much for the help. I will work on getting them settled first then! I definitely know I could handle a credit builder card now and not cause myself any issues but would be more worried about getting declined applying for one! Do you think this is likely?
I have been in 2 minds on financing a car but with a better car I can get better work as it is taxiing I am doing and I could make more money to pay it off faster but this is something I won’t rush into either as I am prioritising getting all my debt cleared and to have a deposit and credit good by early 2026.
Thanks for all your help Sara.
Sara (Debt Camel) says
one decline doesn’t much matter – just leave it at least 4, preferably 6, months before applying aagain
Jim says
Would zilch be an okay app to use for building credit or would you think it’s better not to have on my credit record at all? I’m worried about making bad decisions on my credit file now.
Thanks
Sara (Debt Camel) says
No I would give them a miss. Go for a normal credit card, not confused with pay in 3 type offers.
Jim says
Okay thanks Sara, I got declined for a credit card with zopa and accepted for Zilch but I will just cancel my agreement before using it(I have 14 days to do so), would that now not be on my credit file at all? I will work on clearing my 2 current debts and hopefully have that sorted in 6 months and apply again. Do you think that’s my best course of action?
Thanks,
Jim
Sara (Debt Camel) says
You can keep the Zilch card but not use it if you want.
I think you are overworrying about your credit record. Do the sensible things – clear the debts – the defaults will drop off later.
KC says
Hi There
I have a default started September 2018 and now I have paid partially and the credit report shows satisfied and closed.
My question is, will this be dropped from my credit report from September 2024?
Sara (Debt Camel) says
yes, if there is a default date on a credit record in Sept 2018 it will drop off 6 years later in September 2024
Siobhan says
Hi Sara,
I had a default registered I. May 2017. This was with djs. The default was not paid but did drop off in May 2023.
I’m currently applying for a mortgage and it has been pointed out that Djs have added a debt assigned marker to my credit file in June 2023 for the same debt. This is only appearing on transunion and not experian/Expedia.
Is this allowed?
Sara (Debt Camel) says
have you been paying a debt collector?
Siobhan says
Hi Sara,
No, I have not been paying a debt collector and Djs is in administration. I have had no emails or letters regarding this debt.
Thanks!
Sara (Debt Camel) says
I suggest you complain to the administrators and ask them to remove this. Point out that the debt defaulted in May 2017 and is statute barred.
DeeDee says
Hi Sara,
I fell into arrears with my vanquis credit card in November 2019 and received a notice of default in January 2020. I was then contacted by robinson way and I agreed to make £50 per month payment, which I kept up until May 2020 and then I received a letter from Lowell saying they were now in charge of the debt. I then noticed on my credit report that the default was registered by Lowell in May 2020. I stopped making payments and fast forward to 2023 I asked for Lowell to send me the credit agreement, notice of default and any other information they had relating to the account. They responded saying they didn’t have this information and I would need to contact vanquis. Vanquis provided the last letter that they sent to me detailing the default notice, which was in January 2020. So I questioned this with Lowell and said shouldn’t the default be from January as that’s the last letter I received. They essentially said no that’s just a notice and that the default wasn’t added until May 2020. So I asked should a notice not be sent to advise when the default is being applied? Equally after I launched an official complaint with them about the lack of information they were able to provide, they then sent me the same January letter that I sent them as proof. of the default. I am wondering if I have an argument that could be taken to the financial ombudsman?
Sara (Debt Camel) says
Several different points
1) a notice of default is not the same as adding a Default to your credit record. But they often happen at the same time. Is it really worth this hassle to get the default date changed from May20 to a few months earlier? You aren’t going to be able to get it removed.
2) it is a great pity you asked Vanquis for the info. If Lowell was unable to produce the CCA agreement the debt would have been unenforceable in court and you could have stopped paying. But now you have the CCA agreement from Vanquis
3) how large was the Vanquis debt? Did they increase your credit limit too high? If you could win an affordability complaint to Vanquis (see https://debtcamel.co.uk/refunds-catalogue-credit-card/) your balance would be reduced and when the debt is cleared the default would be removed from your credit record
DeeDee says
Thanks for your reply, tbf my query with them started from last year November and they took till now to address it as a complaint. I haven’t paid anything in the last 4 years at all but I need to buy a new car and this default seems to be affecting my credit card utilisation as it’s still marked as open even though it’s defaulted. The amount is over £3000 and I had complained to the FOS about affordability 3 years ago to no avail. I thought the length of the default impacted how it affects your credit? If it is partially settled would that positively impact my utilisation?
Sara (Debt Camel) says
Older defaults affect your credit score a bit less, but with an unsettled default you will probably be in the bad credit category.
Partially settling it won’t affect your credit score but may mean a lender is more prepared to lend to you. On the other hand it means you will need to borrow more as you wil have less money for a deposit.
DeeDee says
Ok makes sense, I was made redundant a couple months ago and have some money while I’m interviewing for new jobs, so just trying to think how best to distribute the money so not to leave me in difficulties if I don’t get a job by June.
Sara (Debt Camel) says
I don’t think you should make any settlement offers until you have found a new job.
Jodie says
Hi Sara,
Thank you for all the info you have on this website, it has really helped over the past 12 months.
I just have a question. I am currently in a DMP since 12 months ago – which is planned to last 14 years! I have outstanding debts of around 26k. I originally wanted to apply for a DRO but 12 months ago the debts were over 30k and I had paid off a considerable amount from one loan 12 months prior. Therefore, I wasn’t considered eligible as I had favoured only one lender. This is now coming up to two years which I believe may make me eligible?
My main question is, having received the defaults on my account last year, will applying for a DRO affect my credit score for a further 6 years from acceptance or will it just be affected from the default dates of last year?
Many thanks
Sara (Debt Camel) says
The defaulted debts will drop off 6 years after the default date. The DRo will be on your record for 6 years.
But this is a no brainer. You can’t spend 14 years painfully repaying debts rather than have an extra year of the DRO on your credit score.
Who did you talk to before about a DRO?
Jodie says
I was signposted to Payplan via Halifax and that’s who I set my DMP up with last year.
Thanks
Sara (Debt Camel) says
Have you managed to pay off 4K in a year? What are you paying now to your DMP?
Jodie says
I wrote to all the lenders about irresponsible lending so managed to get some of it down that way :) the DRO is budget dependent isn’t it but with allowances for yearly budgeting I’m well within the criteria, at the moment I don’t put anything aside for christmas and such.
Thanks
Sara (Debt Camel) says
that’s fine. I suggest you talk to Payplan about when you switch to a DRO. let me know what they say.
Jodie says
£180 a month – sorry didn’t see the last question.
Sara (Debt Camel) says
is that amount affordable? if it is, it is unlikely you will qualify for a DRO.
Do you have anything that will change in the next few years, eg car finance ending? childcare costs dropping?
alison says
Hi can you please give me some advice. I have a defaulted account with debenhams- it is for £4000. It will be 6 years old in August this year> im not in an arrangement plan but I have made some payments to the account over the years but not a lot.
Will this default and the balance drop off my credit report in August? so will my outstanding debts balance reduce by this amount too? we are wanting to remortgage at end of 2025- will they be able to see this default or that I still owe money? what do you suggest? thanks
Sara (Debt Camel) says
this is a store card? who is the lender?
when did you last make a payment to it? how often do they write to you?
have you looked at your credit record – what is the default date recorded there – it may not be what you expect?
Alison says
Yes it was a store card with Debenhams.
They never write to me- I last made a payment to them a couple of months ago. The default recorded date is August 2018 so should drop off August 2024. Does the whole debt drop off that I still owe or just the default?I don’t understand and find it confusing. Will my outstanding debts balance reduce by the amount of this default? Will a mortgage provider be able to see my default or that I still owe money if we make a mortgage application? Thanks for your advice
Sara (Debt Camel) says
“Does the whole debt drop off that I still owe or just the default?”
the whole debt drops off your credit record.
“Will my outstanding debts balance reduce by the amount of this default? “
yes on your credit report. But you still legally owe this debt and if you do not start paying, the creditor may well take you to court for a CCJ, which would be on your credit record for another 6 years
“Will a mortgage provider be able to see my default or that I still owe money if we make a mortgage application?”
yes if you are making any payments, as they will be visible from your bank statements that mortgage lenders ask to see.
so this account hasn’t been sold to a debt collector? When was it opened with Debenhams?
Alison says
No it hasn’t been sold on and was opened on 2001
Sara (Debt Camel) says
ah that is a VERY old debt.
In that case, read https://debtcamel.co.uk/ask-cca-agreement-for-debt/. If Debenhams cant produce the agreement, the debt is unenforceable in court and you can simply stop paying.
Alison says
Thankyou for that. I have literally paid them £20 in the past 4 years. So should I ask for the copy of the agreement now do you think or wait for the default to drop off?
Also if they were to go for a CCJ do they have to write to me to give me the chance to repay or will it just happen? Thanks so much for all your help.
Alison says
I believe that Newday have now taken over the store cards so should I write to them for the agreement? I’ve never had any communication from them?
Sara (Debt Camel) says
Does it show as Newday on your credit report?
Sara (Debt Camel) says
ask for the agreement now. It isnt relevant whether it is on your credit record or not.
if they cant produce the agreement, they wont go for a CCJ. If they can, then you need to carry on paying them to avoid a CCJ.
Antonino R. says
Hi Sara, and thank you for all the suggestions you provide to people facing financial difficulties. It’s really appreciated: being on the verge of bankruptcy can be a real drama and can lead to serious consequences.
I had reckless financial behavior despite earning well (more than £4k a month) and I was always at zero in my bank account. In May 2021, a default was registered for an overdraft of £2000 with Lloyds Bank, and subsequently in July with Link Financial. I
n these three years, my life has drastically changed; I took control of my destiny, created an Excel file, and set priorities to repay my debts (around £15,000 in credit card debt). My credit score was 200, now it’s 600, and I’ve even managed to get a personal loan and an overdraft with Monzo.
My current situation is more than positive; I have a permanent job, and my credit utilization is below 50%, no overdraft, no late payments. Sorry for the long preamble, I’ll get to the point. I would like to handle the default in the most convenient way for me and would like to understand what that might be before making any mistakes.
Should I call Link Financial and pay the £2k all at once, or set up monthly payments?
Thanks very very much
Sara (Debt Camel) says
Link may well accept a settlement offer! However you settle this defaulted debt, in part, in full, with on going payments, will make no difference to your credit score and the debt will still drop off your credit record 6 years after the default date.
The way to improve you credit score fastest is to get your credit utilisation down more.
Donna says
Hello,
Hope you are well.
I have 9 default account as a result of being without work in 2022/2023, at the time I was a full time nursing student and signed up for ad-hoc shifts to cover the bills however my employment checks took longer that it should (10 months) and resulted in being out of work and just barely scraping by.
I did not have good financial education prior to meeting my husband however after re-learning about finances I realised how having multiple credit cards and credit accounts can impact my life negatively If I am not well prepared for uncertain situations like employment.
Since the end of last year I have been paying off the debts in full by following the Dave Ramsey plan.
One of the accounts in default, the creditors offered 80% discount on settlement. This was not my initial plan to have a partially settled account however as it is now in default does it matter if I accept the settlement and be out of debt before the end of year?
We are hoping to purchase a property next year and due to my credit history we will be going down the route of using a broker who specialise with clients who has adverse credit.
My other question is, will the partially settled on these my default accounts impact my future Mortgage application?
Also how many accounts do you think I should request a settlement for if that route is also a positive option?
Looking forward to your reply
Sara (Debt Camel) says
I think you should settle debts as cheaply as possible! It will be very hard for you to get a mortgage at a decent rate because you have so many recent defaults – any mortgage lender that doesn’t mind the defaults is not going to care less about a partial settlements. How many of the 9 have been sold to debt collectors?
These 9 defaults – did any of the lenders lend you more money when you were already in difficulty? eg a credit card that increased your credit limit at a time when you had a lot of other debts and were only making minimum payments?
If they did, you should look at affordability complaints – see https://debtcamel.co.uk/tag/refunds/ whioch has article with templates to use about different types of debts. Then you could get a refund, not of what you borrowed – that has to be repaid – but of the interest added. One of the big pluses for you in winning a complaint is that you could also get the negative mark removed from your credit record. This can take time so I would kick off as many as possible as soon as you can.
Donna says
Hi Sara,
Thank you.
They were all sold on unfortunately as I was going through a hard time and was too ashamed to speak to anyone about it.
At the moment, I currently owe 3 debt collectors as the rest I have settled in full. My current income is around £50,000 per annum and I am aiming to be debt free by the end of the year.
The last account I opened before financial hardships was a Natwest student account whilst at university which had a £2000, by then I already had two credit cards balance of almost £8000, PayPal credit account £3000+, shop direct £1000+ , £700 overdraft. At the time of opening, it did not show I was in any financial difficulty as I was approved.
I will look into the affordability complaints and see if I am entitled to any refund. I know a lot of damage has been done but I am trying to make the best out of a bad situation.
Thank yo so much.
Sara (Debt Camel) says
All sold on is good. Debt collectors are much more likely to accept a settlement than the original lender. But you are late on in the repayment journey, they probs won’t accept a low offer.
Iain says
I am about to default on two credit cards. One £12900 the other £4600. I am currently not paying anything to either of them. I am very worried about what happens next. Will people be knocking on my door asking for it?
Sara (Debt Camel) says
Are these your only two debts? Or are you choosing to pay some but not these two?
Is your situation very temporary?
Iain says
No I have 4 other ones that are smaller balances between £800 and £2800 and I have been paying them. I have no money to pay the other two I have already mentioned. No my situation is not temporary.
Sara (Debt Camel) says
The important thing in a difficult situation is to treat your creditors equally. I suggest you talk to StepChange (phone 0800 138 1111 – https://www.stepchange.org/) about your options, which could include a debt management plan for all your debts – in that case interest would be frozen and with a fair arrangement in place they arent going to take you to court or send round debt collectors. (They can’t send round bailiffs until they have been took court and get a CCJ.)
In addition to doing that, you should look at whether you have an affordability complaint against any of these lenders, see https://debtcamel.co.uk/refunds-catalogue-credit-card/. But they take a long while to go through, so you also need to either talk to either talk to StepChange or talk to the creditors yourself.
Iain says
The 4 cards I do pay pushes me to my absolute limit every month. I have virtually nothing left. Could I just default on all 6 cards then as that would be treating them equally? After reading other chats on here you say that taking out a DMP or taking out a payment arrangement with the creditor stays on your credit file for longer than defaulting?
Sara (Debt Camel) says
How much are you paying a month to the other 4 cards?
Iain says
Around £400
Sara (Debt Camel) says
So what you are doing now makes no sense. You are paying more than you can really afford to 4 credit cards who are charging you interest, so the debts drop very little. While you aren’t paying anything to the largest two, so your credit record is going to be wrecked because of the two defaults.
This is unsustainable. You aren’t clearing the debts, your aren’t protecting your credit record (which wasn’t doing you any good any way)
You need to get in to a safe financial situation. This could be say a DMP with StepChange that divides 250 or 300 a month between all 6 of your debts and gets interest stopped on them all . You have some more money left each month, your creditors will freeze interest and wont go to court or send debt collectors round.
If you contact StepChange this week, your first payments may be in late September or Early October. You stop paying all the creditors now, so you have time to build up a small emergency fund before the DMP payments start. And you will have missed 2 months payments to the 4 you are currently paying, so you are more likely to get defaults added quickly. And you can tell the 2 large creditors that you are talking to StepChange about a DMP.
Also when the DMP is set up you can look at affordability complaints against any of these cards that gave you an unrealistically high credit limit – that may be all of them. Winning any will reduce your balance owed in the DMp so the DMP finishes sooner.
Eliza says
Hi Sara, sorry to jump on this.
I had a £115 pound debt defaulted in April 2019.
This was then sold in to lantern and showing as a worst and most recent D giving me a total of 3 defaults.
I queried this with Lantern in March this year – so had made contact with them. will this increase the amount of time the default shows on my record please? Also- will I benefit from paying this off asap?
Many thanks
Elizabeth
Sara (Debt Camel) says
Does the Lantern debt have the same default date – April 2025?
And what sort of debt was it originally?
Eliza says
All defaults are listed as April 2019.
The original debt was a £100 loan from Oakham:
Many thanks for your time
Eliza
Sara (Debt Camel) says
Getting multiple defaults for one debt all with the same default date looks dreadful on your credit record but actually it is what is supposed to happen when a debt is sold and only one of the defaults counts against your credit score.
These debts will all drop off your credit record in April 2025. Stating to pay a debt will not change this.
Paying the debt will not improve your credit score but may make some other lenders happier to lend to you.
Lantern may accept a settlement offer of less than the balance. This will not mean the debt stays on your credit record for longer
Eliza says
Thank you so much for your help. How long after these drop off (I actually also have a separate one with the same drop off date on my file) will I see a difference in my report / score? And how much roughly would it be? I have no other major issues on my report.
Really appreciate all your help.
Sara (Debt Camel) says
the reports should reflect thr debts dropping off within a month. May be quicker, depends on the timing of the reports.
See https://debtcamel.co.uk/credit-score-change/ which looks at how much some problems affect your score. i can’t guess what may happen in your case.
But you do have to decide what to do about the lantern debt. If Lantern go for a CCJ your credit record is wrecked for another 6 years
Eliza Beth says
Thank you. If I contact them and pay off the amount, this definitely won’t restart any of the default time? I’m in a position to do this comfortably. Sorry for the many questions but I am now so close to losing these debilitating credit references I’m scared to make a mistake.
Thanks again.
Sara (Debt Camel) says
no it won’t.