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- How To Get Help With A Default Notice
- What Is A Default Notice?
- What Does It Mean If You Get A Default On Your Credit File?
- Why Would You Receive A Default Notice?
- What Can Creditors Do Once You Have A Default On Your Credit Report?
- What To Do If You Receive A Default Notice?
- Debt Solutions If You Can’t Afford To Pay
- What Happens If Your Debt Is Passed To A Debt Collection Agency?
- What Impacts Will A Default Notice Have On Your Life?
- Applying To Have A Default Notice Removed
- Get In Touch With IVA Helpline Today For Advice On Default Notices
How To Get Help With A Default Notice
It can be incredibly worrying to receive a default notice, but it’s important to take a second to breathe. You won’t be the first person to miss payments to a lender, and you certainly won’t be the last.
Unexpected expenses can impact us all, and if you don’t have savings for a rainy day, it is easy to start falling behind on your bills.
A notice of default on your credit agreement is a warning; you have a chance to rectify the situation so that it does not impact your credit score. If you pay the money owed within 14 days, it won’t show on your credit report.
With that being said, read on to discover everything you need to know about default notices, defaulted accounts, and how they impact your credit file.
If you have any queries or feel ready to talk to a trusted professional about your debt problems, please do not hesitate to get in touch with our friendly team today on 0800 464 7235 for free debt advice. We can provide you with the best advice for your situation, ensuring your credit score is protected where possible.
Check if you qualifyWhat Is A Default Notice?
So, what is a default notice? A default notice is a formal letter from a company or creditor to who you owe money, informing you that you are in arrears and you must make a payment of ‘x’ amount by a certain date to prevent a default on your credit file.
So, for instance, if you have a credit card and you have not made any payments within the past three months, the credit card company may send you a default notice, requesting you to pay three months worth of payments within 14 days.
This gives you an opportunity to rectify the situation so that it does not end up showing as a defaulted account on your credit report, as this could impact your credit history for six years. If you pay within 14 days, the default will not be registered, and so your credit file won’t be impacted.
Default notices are commonly sent out for missed payments on:
If you do not pay the funds owed within the 14-day period, then the default will be added to your credit file.
The letter will explain everything such as the number of missing payments, how you can make the payment, and what you need to do to prevent any further action from being taken and the default being placed on your credit file.
If you receive a default notice, then it is important that you don’t ignore it. It’s usually the first step taken by a creditor, which means that if you deal with it at this stage then the creditor will take further action.
If you ignore your default notice then you will get a default on your credit file and it can stay there for six years. Considering credit history is taken into account for mortgages, loans, and financial products today, this can be quite a hindrance.
If you are not able to pay the arrears on the notice, the worst thing you can do is bury your head in the sand and hope it will go away. Instead, call our friendly team for independent advice to help you protect your credit score on 0800 464 7235.
Call us on 0800 464 7235
Our trained advisors are here to help, so if you think an IVA proposal is one of the best debt solutions for you, don’t hesitate to call us on 0800 464 7235 to speak to one of our trained debt advisors or click below to see if you qualify…
Check if you qualifyWhat Does It Mean If You Get A Default On Your Credit File?
Receiving a default notice is worrying, but it is not the end of the world. Failing to act on the notice is when problems arise, as this will result in a default on your credit report.
If you don’t deal with the notice then a default will be registered on your credit file for six years and could stop you from being able to get credit for other things.
For example, a default on your credit report can affect your chances of getting a mortgage for your house or even help with buying something much smaller.
It’s important not to ignore a default notice and to act on it within the 14-day window stated in the letter. If you don’t then your credit agreement will be cancelled, and the default will be placed on your credit file.
As well as this, the creditor has the ability to demand you pay the entire amount or they can begin court proceedings against you.
It might be that your creditor will sell your debt and pass your details onto a debt collection agency which will mean you then owe them instead and will likely receive a lot of phone calls and letters until the debt is repaid.
A default could also lead to something more serious and if court proceedings are started against you to recover the debt you may end up with a Country Court Judgement (CCJ) made against you, which will have a negative impact on your credit file.
Why Would You Receive A Default Notice?
You would receive a default notice if you have missed several payments on something like your credit card, a hire purchase agreement such as one for a car, a mobile phone contract, credit card payments, or any arrears you have with your bank account.
Depending on which organisation you owe money to, they may send you a default notice after only three months of missed payments or it could be as many as six.
However, a default notice can only be issued if the debt is regulated by the Consumer Credit Act 1974. It should include specific information such as what the agreement is that has defaulted, the number of missing payments, the terms that have been broken, and what you should do next.
You may also get an information sheet along with your default notice which will help you with any other questions or queries you may have.
This information sheet will be prepared by the Financial Conduct Authority (FCA) and will tell you how you can get free advice from debt charities and other further information about your credit files which may be of help.
What Can Creditors Do Once You Have A Default On Your Credit Report?
There are a few different things that a creditor can do once you have received a default on your credit file:
Go to court in search of a CCJ (County Court Judgement)
The lender may take out a CCJ against you, otherwise known as a County Court Judgment. This will be reported to credit reference agencies, impacting your credit history for six years.
If you receive a judgment, this means that the court has formally determined that you owe the money specified to the lender.
You will receive a judgment in the post and it will state the following:
Unless you pay the full amount within one month, records of judgments are kept on your credit file for six years, making it more difficult to get credit.
What can you do if you receive a judgment?
You need to pay the money back if you can afford to do so. If you cannot, you can either pay it back in instalments or change the terms of the judgment.
You can apply for the judgment to be cancelled if you did not receive the original claim from the court stating you owed the money or you do not owe the money.
Pass your debt to debt collectors
The creditor may decide to sell the debt to a collection agency. When this happens, it means that you owe them the funds instead.
You still legally have to pay the money you owe; you are simply paying it to another organisation.
A debt collection agency will use a number of different tactics to try and get you to pay the money you owe, including a lot of letters, phone calls, and emails. They may even send someone to your home to attempt to retrieve the funds.
It is important to realise that debt collectors do not have legal rights like bailiffs do. Therefore, you do not have to open the door to them, and they certainly do not have any rights to take your possessions.
Repossess your goods
In the case of conditional sale and hire purchase agreements, it is possible for the creditor to repossess the goods if you do not keep up with the repayments.
A creditor cannot simply enter your home and start taking possessions that have no relation to your credit agreement.
Call us on 0800 464 7235
Our trained advisors are here to help, so if you think an IVA proposal is one of the best debt solutions for you, don’t hesitate to call us on 0800 464 7235 to speak to one of our trained debt advisors or click below to see if you qualify…
Check if you qualifyWhat To Do If You Receive A Default Notice?
If you receive a default notice, it is easy to go into panic mode. However, it is important to take a moment to breathe and assess your options carefully. Remember, you can still prevent anything from being reported to the credit reference agencies and appearing on your credit file.
Let’s take a look at some of the different steps to follow:
Read the notice carefully
The first thing that you need to do is read the notice carefully. The notice will state how much money you owe the company, i.e. your arrears.
The notice will also state the steps that you need to take to prevent further action from happening. This will typically mean that you need to pay your arrears within 14 days from the date stated on the letter.
This is important; it is not the date you receive the letter that matters. It is the date printed on the letter. In reality, this could mean you only have around 8 days to make the payment.
The notice should also state what will happen if you do not make the payment owed. Typically, the lender will cancel your agreement, which will mean you owe the entire balance immediately. They will also put a default on your account, which will show on your credit file.
Aside from this, the default notice should also provide you with information in terms of how to get in touch with the company to discuss your options. While you may feel embarrassed, the best thing to do is get in touch with the lender. They are there to help you, and they have helped many people in a similar position before.
At the same time, it is vital to note that any sort of resolution or payment plan does not typically result in the default being avoided. The only way to do this is by paying the arrears on your account within the specified time frame.
Review how many missed payments you owe
It is also important to take a look at how many payments you owe. How many months have you missed?
A default notice can only be applied to your account if you have missed three or more payments.
If a credit reference agency is showing a default on your credit file when you have only missed one or two payments, this is an error and should be removed.
While you still owe the money, you may be able to come up with a suitable payment plan so that you can get your payments up-to-date before you reach the third missed payment and end up with a default impacting your credit history.
Contact your creditor for a resolution within 14 days
Your default notice will contain information on how to get in touch with the creditor.
It is important to do this at the earliest possible opportunity. Getting in touch with the creditor shows that you have made a dedicated effort to find a resolution, which is important.
If you have already received the default notice, you will need to pay the arrears within 14 days to stop the actions stated within the default notice and your credit score from being impacted.
However, you may be able to come up with some sort of payment plan moving forward so that you do not find yourself in the same position again.
After all, if you make the arrears payment but you are not confident you can make the payments in the coming months, you will find yourself in the same situation again.
The best thing to do is call your creditor and be honest and upfront. They will run a budget and help you to pay off an amount that is affordable for you. If you have lost your job and do not have any income, they will be able to put together a plan that works for you.
It could be that you pay off as little as £1 per month until you find employment again and that all interest is frozen on your account. There are lots of solutions at their disposal, so keep this in mind.
Debt Solutions If You Can’t Afford To Pay
It is important to pay the default notice within 14 days if you are able to. This prevents further action and ensures you don’t end up with a default on your credit file.
If you do not have the funds available to do so, consider asking a friend or family member for help.
We know that it can be embarrassing to discuss this with a loved one, but you can often find that opening up and taking the burden off your shoulders can be one of the best things you can do.
However, we know that there are situations whereby people have no way of paying off the arrears in question.
So, what are your options if you cannot afford to pay the debt?
Agree on a repayment plan with your creditor
The first option to consider is agreeing on a repayment plan with your creditor. To do this, you will need to put together an accurate budget first. You will need your debts, household spending, and income per month for this.
Once a realistic budget has been put together, you will understand how much money you can afford to put toward unsecured debts per month, once your essential living costs have been covered.
So, to work out how much you can afford to pay per month, do the following:
- Figure out how much you need to repay in debts per month
- Work out the percentage of total debt you owe per creditor
- Divide your total based on what you owe to each creditor as a percentage of your total debts
This will enable you to realistically determine how much you can afford to pay toward each credit card or loan per month. Don’t be pressured into paying an amount that you are unable to afford!
Once you have this information, get in touch with your creditor via letter, email, or phone. Explain the situation and tell them how much you can afford to pay per month.
Provide your budget so you can display why this is an amount you can afford. You should also explain why you cannot keep up with the payments, for example, you have a mental health issue, you are going through a divorce, or you are not earning as much as you once were.
Most creditors will work with you to come up with a plan that you can afford.
Debt Management Plan (DMP)
Another option is a debt management plan (DMP), which enables you to manage your debts and pay them off at a rate that is more affordable by making lower monthly payments.
With a DMP, you only pay what you can afford. Plus, rather than making lots of monthly payments to different creditors, you will make one monthly payment under a DMP.
Charities like StepChange can manage this for you, and they will review your DMP regularly to make sure you only pay what you can afford.
There are always some risks or drawbacks to be aware of. While a lot of creditors will stop or reduce charges and interest, they are not obligated to do so under a DMP.
Also, your credit file may be negatively impacted because you are going to be paying back your debt over long agreements.
A DMP does not remove the threat of further action, such as a County Court judgment (CCJ), which further impacts credit files.
Individual Voluntary Arrangement (IVA)
Another option to consider is an individual voluntary arrangement (IVA), which is a formal agreement that enables you to make affordable debt payments over the course of around five to six years.
Once your IVA has finished, the rest of the unsecured debt is written off. You are also able to make a lump-sum IVA, which is a one-off payment.
If you own a home, you will usually be able to keep it so long as your mortgage payments are maintained.
However, your IVA will be recorded on a public register and your credit score will be negatively impacted. This will show on your credit report for six years.
Also, please note that the only debts that are going to be written off after the six-year period are those included in the agreement. If you mount up further debts that are not included, they will not be written off, so do keep this in mind.
If your IVA is not successful, the creditors may request the supervisor of your IVA petitions for you to be made bankrupt. Bankruptcy will also stay on your credit file for six years.
Debt Relief Order (DRO)
Finally, you may be eligible for a debt relief order (DRO). This is an approach that enables you to have your debt written off if you have few assets and a relatively low level of debt.
This can be a low-cost alternative to bankruptcy. With this option, you will not pay anything toward your debt for a whole year. After this period, your debts will be written off.
During the 12-month period, the creditors cannot get in touch with you to try and get the debts back. You won’t need to appear in court. This is a formal debt solution.
However, this option is not available to everyone, so do keep this in mind. You cannot apply if you are a homeowner, for example. Moreover, you must owe less than £30,000 if you live in Wales or England. If you live in Northern Ireland, you must owe less than £20,000.
There is also a fee of £90, which is non-refundable. This is a one-off fee that needs to be paid to the Insolvency Service.
Finally, your credit report will be impacted. In terms of your credit history, a DRO will appear on the public register and your credit score will decrease too. This is something that will impact your credit file for six years, so you do need to take it very seriously.
What Happens If Your Debt Is Passed To A Debt Collection Agency?
If your debt has been passed onto a debt collection agency, this means that the company you owe the debt to has then sold your debt to the debt collection company.
Therefore, you owe the money to the debt collection company instead. You still need to pay the money you owe. You simply owe it to a different person.
This happens whether your debt has been sold to an agency or if the original lender has simply enlisted an agency to act on their behalf.
Either way, it is vital that you get in touch with them immediately so you can explain the situation and let them know about your affordability. This is even more critical if you are in a vulnerable position at the moment.
The debt collection agency has a duty to provide you with extra support, if necessary so that you can pay back the money you owe in a manner that is comfortable for you.
It is vital that you realise that a debt collection agency cannot enter your home and take your belongings. A bailiff can do this. A debt collection agency does not have this right. You do not need to let them into your home, so do keep this in mind.
What Impacts Will A Default Notice Have On Your Life?
If you are able to pay the default notice within the 14 days specified, it does not have to have any impact on your life.
However, if you do not pay the default notice within the time that has been specified, it can certainly have an impact on your life.
Firstly, the lender is likely to cancel your financial agreement, and this means that all of the funds will need to be paid upfront. This can place an even greater financial strain on you.
In addition to this, the default notice will go on your credit file, and it will stay on there for six years. This means that your score will reduce considerably, and whenever you apply for credit, the lender will be able to see the default.
This will make it incredibly difficult for you to get credit, whether a loan, credit card or mortgage. While the impact on your score will decrease as the years go on, there’s no denying that your lend-ability will be impacted throughout the six-year period.
Call us on 0800 464 7235
Our trained advisors are here to help, so if you think an IVA proposal is one of the best debt solutions for you, don’t hesitate to call us on 0800 464 7235 to speak to one of our trained debt advisors or click below to see if you qualify…
Check if you qualifyApplying To Have A Default Notice Removed
If you feel that the default notice is incorrect, you can apply for it to be removed.
For a default notice to be removed, one of the following must apply:
- Sufficient time has passed
- There has been some sort of mistake
Sufficient time has passed
As mentioned, a default notice will remain on your account for six years from the date that it was added.
Once this date has passed, the default notice should be deleted automatically.
Whether or not you have caught up with the payments will not make a difference in terms of the removal of the default notice.
If the default was added later than it should have been, you can get in touch with the company in question so that they can amend the date, meaning it will be removed from your account earlier.
There has been some sort of mistake
Errors can happen from time, and so it is important to check your credit report regularly. If you believe that a default has been applied to your account and it should not have been, you need to get in touch with the lender as soon as possible.
Some of the different reasons you can use to argue your case include the following:
Simply get in touch with the lender. Explain the situation, and ask them to resolve it.
If the lender refuses to do so, you should then get in touch with the credit reference agencies. Provide evidence to support your claim. They will be able to assist you.
If you are having any troubles, you may want to consider enlisting the assistance of Citizens Advice or Step Change. They will help you through the process.
While it can be a long-winded process, it will be worth it if you are able to get your default removed.
Get In Touch With IVA Helpline Today For Advice On Default Notices
We know that receiving a default notice can be incredibly worrying, especially if you are unable to pay the amount you owe.
At IVA Helpline, we provide you with a safe place to discuss your debt concerns, helping you to understand the different options that are available to you.
It is important to know that there are always options, even when you feel like you don’t have a way out of debt.
Simply get in touch with our friendly and experienced team today on 0800 123 4567, and we will help you to make positive steps forward and get on the road to being debt-free once and for all.
Frequently asked questions
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How will default notices affect my credit rating?
The default notice itself will not impact your credit file. However, if you do not take the action requested and your account defaults, this will be recorded on your credit file.
A default will stay on your credit file for six years from the default date, irrespective of whether or not you go on to pay the debt.
You can expect a default to take around 350 points off your credit score, and it will leave its mark on your score for a considerable amount of time.
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Can a default on credit file be removed?
Once a default has been recorded on your credit profile, it cannot be removed unless there is an error.
It is vital to check your credit report regularly because mistakes can happen. If you feel that the default has incorrectly been added to your account, it is important to get in touch with the lender as soon as possible.
There are a number of examples whereby the default may have been erroneously added to your account, with examples including the following:
You brought your account up to date within 14 days of receiving a default notice
The debt was Statue Barred
Duplicate defaults (typically added a second time by a debt collection agency)
You were in arrears by less than three months
Admin errors
Mistaken identity
The lender did not attempt to collect the payments
If the lender does not agree to remove the default, you can ask the credit reference agency to remove it. You will need to provide evidence for this to happen.
It can be a tiresome process to remove a default, but you should definitely do so if the default is not correct.
If the default on your credit report is correct, it will automatically be removed after six months, irrespective of whether you have finished paying the debt off or not.
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Will my creditor send debt collectors to my house if I don’t pay?
Your creditor is able to use different ways to try and get you to pay your debts. They may send a debt collector to visit your home in person. However, they will typically write to you or call you first.
A debt collector is not the same as a bailiff or an enforcement agency. They do not have any legal powers. Therefore, you do not have to let them into your property, and they certainly do not have any right to take your goods away.
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Can I ignore a default notice?
No, you should not ignore a default notice. If you ignore a default notice, a default will be placed on your account, and this will stay on your credit report for six years.
Not only this but the lender will likely cancel your credit agreement, making the entire sum payable.
Even if you cannot pay the arrears, the best thing to do is get in touch with the lender as soon as possible. They will work with you to come up with a solution that makes sense, enabling you to pay off a comfortable amount per month.
It is important to note, though, that even if you do set up a payment plan, if you do not pay the arrears within the 14-day period, a default will still be registered with the credit reference agencies.
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