You will default on an account if you do not pay arrears on the account. The lender usually cancels the credit agreement you have with them, registers the default with one or more of the credit bureaus, and can 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 next?
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). They are able to take you to court for the full amount up until six years after the default is issued.
How does this affect my credit file?
Defaulting on an account is considered to be Bad Credit, which you’ll want to avoid having on your account. It will take six years to come off your report, even if you haven’t finished paying yet, in which time you’ll find it difficult to get credit, and will undoubtedly get higher rates of interest if you do. You can read more about Bad Credit, and its impact on your report here.