Default Notices and Accounts Due to Arrears

This debt advice applies to individuals in the UK with personal debts.

You may get a default notice from your creditors once you missed payments, or fail to pay the agreed amount. This is referred to as a notice of default. Once your creditor puts your account in default, this will be registered in your credit file. Thus, it can affect your credit record, making it hard for you to secure debts in the future.

You must remain compliant with the terms of your agreement; otherwise, your creditor will terminate your agreement. Though your debt can only default once, your creditor can take further steps to recover the debt. You may read our post if creditors can force you to pay your debt.

Financial Help During COVID-19 Pandemic and Default Notices

Several measures are considered to assist individuals who are coping with the effects of COVID-19 or Coronavirus Pandemic to their finances. These include payment breaks on mortgage and payment holidays for some unsecured debts and moratorium extension for residents in Scotland.

You may also read our guide: Financial Help Available During Coronavirus Pandemic and Payments for Car Loans and Finance During Coronavirus Outbreak.

Default Notice Explained

A notice of default is a letter from your creditor. This serves as a warning that your account will soon default if you failed to secure payments. You will have at least 2 weeks to settle your arrears. If you can bring your account up to date, your account will not default.

This is usually sent when you pay less then the amount agreed within 3 to six months period. This only applies to debt regulated by the Consumer Credit Act. These debts include store cards, credit cards, overdrafts, personal loans, and HPA.

Does a default notice harm my credit rating?

The notice itself does not harm your credit rating. However, once your account is in default this can be registered in your credit files which can greatly affect your credit. In this manner, your credit score will be modified by the credit reference agencies.

A defaulted account means you cannot keep up with the agreed payments. This can be difficult for you to obtain a loan in the future since creditors are likely to check your creditworthiness. This will imply that you may be incapable to pay them back the amount that you wish to borrow.

Besides, you might also have a hard time obtaining a new credit card, or opening bank accounts. or even a new mortgage.

Additional Information: If your debt is regulated by the Consumer credit Act, a default notice will be sent out as a warning for you to settle payments within the given period.

What happens if I get a default notice?

In a notice of default, creditors are likely to ask you to pay the entire amount instead of installments. Though you can appeal or offer to pay regular payments each month, your creditor may refuse such an offer.

Also, they can seek court actions after your account has defaulted. These include:

How to determine a notice of default?

A default notice contains the following details in bold letters:

  • ‘Important you should read this carefully’
  • ‘Default notice served under section 87(1) Consumer Credit Act 1974’

The default notice will also display:

  • The amount you must pay to bring the account up to date
  • The period provided to settle payments that is 14 days in maximum.

A default notice will recommend you ask the aid of a solicitor or Trading Standards. You don’t need to consider this since the wording of default notices was established in a 1983 law. This is before FREE DEBT HELP from an organization like us was broadly accessible. So, if you get a default notice, give us a call on  0800 193 1024.

What to do if I got a default notice?

A default is shown on your credit record for six years, regardless of whether its pad in full. This can make it difficult for you to take out new loans or any lines of credit.

Any creditor or lender who reviews your credit file will recognize the default. This will be taken into account whenever you try to take out credit or loans. After six years, your defaulted debt will be taken out from your credit record, regardless if it’s paid or not.

In contrast, some creditors may approve your application for new credit even when there’s a default on your credit file. However, you’re likely to be getting a higher interest and charges. Some positions in the financial settings sector may be affected if your account defaults. Though this is rare, your job might be at risk when your employer regularly conducts credit checks.

If any of the scenarios mentioned occurs, do not hesitate to contact us for free debt advice.