If you do not pay arrears on an account, the lender considers you to have “defaulted”. What will happen is this: The lender cancels the credit agreement you have with them. They then register the default with one or more of the credit bureaus. They can then request the whole outstanding balance immediately. You will receive a default notice at least two weeks prior to the account defaulting, and have the opportunity to catch up on missed payments. If you can’t pay, the account will default.
Can a lender cancel the agreement?
Yes. A default occurs when you have broken the terms of the agreement, which enables a lender to cancel it.
What will happen after I default?
The lender can pass your debt to a collection agency, or they can take court action- this could then amount to a County Court Judgement (CCJ). Lenders are able to take you to court for the full amount up until six years after they issue the default.
How does this affect my credit file?
Lenders consider a default on your credit file to be bad credit. Therefore, you’ll want to avoid having one on your account. Defaults take six years to come off your report, even if you haven’t finished paying them yet. In that time you’ll find it difficult to claim credit. You will also undoubtedly receive higher rates of interest if you do. You can read more about Bad Credit, and its impact on your report here.
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Last updated by Robert Edwards, May 2022