What is a default?

At Lowell, we know that it can be hard to get to grips with financial terminology and what it actually means. If you’re in debt, you’ll have likely come across the term ‘default’ at some point but may not be quite sure what it means.

Below you can find out more about what a default is, including how long a default stays on your credit file, if it is possible to have a default removed, and how working with Lowell about your Lowell debt can help with a default:

• What is a default on a credit file?
• What is a default notice?
• How to get a default removed from your credit file
• Is a default the same as a County Court Judgment (CCJ)?
• Can I reduce the negative impact of a default?

This content is intended to be an impartial guide regarding a defaulted debt. Lowell Financial Ltd does not offer financial advice. You can find out more about the organisations you can contact in our guide on debt help and support.

What is a default on a credit file?

A default can occur if the lender decides to end your credit agreement because you’ve missed payments, regardless of how much money you owe. It may happen to an account that you have with a bank, mobile phone company or utility supplier.

If you are unable to keep up with your payments, the people you owe, also known as creditors, may get in touch and send you a default notice. This is to inform you that the agreement you made has been broken as you have been unable to stick to the terms of the agreement (i.e. keeping up with payments) and that the default will be recorded on your credit file if you are unable to take the action outlined in the letter to stop this from taking place. For more information on this, read our next section ‘What is a default notice?’.

If you receive a default notice and clear the missed payments within the period outlined, then the consequences outlined will not take place. For example, a default will not be recorded on your credit file.

You will need to refer to the default notice that you have received for specific information about the consequences/next steps relating to your account.

If you’re unable to make a full payment within the period provided one consequence could be that a default will be recorded on your credit file. If your credit history shows a default on your credit file, it may be more difficult for you to borrow money or apply for loans or other forms of credit in the future. There may be ways you can reduce the impact of a default, particularly if you take steps to start paying back the debt.

If a default is recorded on your credit file, this is effectively a marker which shows that you have broken the agreement. It can be seen by potential lenders if you try and obtain future credit.

If you need more information about credit files, we have a guide talking about how your credit file affects you. Or, you can find free independent advice at Money Saving Expert.

Can Lowell register a default?

Yes, Lowell can register a default.  If we purchase an account before the default was registered, then Lowell may default the account if payments do not meet the original contractual terms (or the terms agreed directly with us).  

Alternatively, a default on your credit file may show as being registered by Lowell even if it was initially registered by the original company. This is because once Lowell has purchased your debt, the default transfers along with the debt. When a default is registered in Lowell’s name, we have a responsibility to make sure the information is up-to-date and accurate.

If you have a Lowell debt which has been recorded as a default on your credit file, you may be able to reduce the impact it has on your credit file by working with us to agree on a sustainable payment plan. This is because we will take steps to report to credit reference agencies that you’re making payments which will be reflected on your credit file, and in turn, reduce your balance.

If you think that a default has been noted on your credit file incorrectly, or something else isn’t right, please get in touch and let us know. You can also raise disputes on your credit file directly with credit reference agencies (CRAs) such as TransUnion, Equifax, and Experian.

At Lowell, we’ve partnered with Transunion meaning that our customers can easily check their credit score through our mobile app.

How long does a default stay on your credit file?

A default will remain on your credit file for six years. After six years, the default will be removed, even if the debt from the default hasn’t been fully paid.

However, a default will be displayed differently on your credit file depending on how you deal with the default:

• Satisfied – This will appear once you’ve paid off the balance in full.
• Partially satisfied – A ‘partially satisfied’ note will be added to your credit file if you’ve paid off less than the original full balance after coming to an agreement with your creditor. This is usually through a settlement/discount.

What is a Default Notice?

Before a default is registered on your credit file, you will receive a default notice or ‘notice of default’ (NOD). This will contain information about what steps the creditor will take if you are unable to take the action outlined in the letter within the timeframe specified’.

The default notice will give you a warning and a specified period of time for you to make up the missing payments, if you’re able, before the agreement is defaulted.

This will be a letter sent by your creditors to tell you about your missed payments and to explain that you have broken the terms of your agreement (e.g. maintaining regular payments).

A default notice is usually sent after several payments have been missed. However, this depends on the creditor and the agreement you have in place. Sometimes you’ll receive a notice after missing three months of payments, but with some creditors it can be up to six missed payments.

Default notices only apply to debts which are covered by the Consumer Credit Act such as personal loans, credit, and store cards.

As part of a default notice, a creditor may also advise that you have a specified time to make up missed payments, or they will terminate the agreement. When an agreement is terminated; this means that the agreement has come to an end and the full balance will become due.

In addition, if the consequences outlined within the notice include registering a default on your credit file, then your creditor must give you 28 days’ notice, also known as a Notice of Intent to Register (NOITR).

How to get a default removed from your credit file

Once a default has been recorded on your credit file, it will remain for six years, but there may be steps you can take to reduce the impact it has on your credit.

First of all, if a default has been registered correctly then it’s unlikely that you will be able to get it removed. Even if you pay the balance in full, a default won’t be removed but updated to either ‘fully satisfied’ or ‘partially satisfied’ to reflect this.

For more information on the different default notes, you can go back to our previous section on ‘How long does a default stay on your credit file?’.

If you’ve looked at your credit report using one of the free checks and find a default on your credit file that you think is incorrect, you can ask for it to be updated or removed.

To do so, you’ll need to get in touch with each of the credit reference agencies and raise a ‘credit report dispute’ explaining why it should be changed. They will speak to the original lender to check their records and/or the company that owns the account such as Lowell.

While the original lender investigates, any other companies or lenders who need to run a credit check on you will be notified that the default on your file might not be accurate. This is because a Notice of Correction (NOC) will be noted on your file which implies that it may be incorrect.

How to get a default removed after six years

Once six years have passed, a default should be removed automatically. If this hasn’t happened then you can ask your creditor to look into this or, if necessary, contact the credit reference agency to get this removed.

Can Lowell remove a default from my credit file?

If you’re concerned that Lowell have added a default to your credit file that shouldn’t be there, or the six-year period has passed, you can get in touch with us to let us know. Our team will investigate the issue and assess how it needs to be resolved.

If the six-year period has not passed and the default has been correctly registered, Lowell can’t remove a default from a credit file. However, if you’re working with us on a payment plan, we’ll let the credit reference agencies know that you’ve started making payments.

Once the debt is fully paid, we’ll make sure that your credit file is updated. If you paid your debt off without a discount and in full, your credit file will be marked as ‘satisfied.’

If you paid your debt off with a discount (also known as a partial settlement), the default will be marked as ‘partially satisfied’. This shows that you cleared the debt at an agreed reduced balance.

Is a default the same as a County Court Judgment (CCJ)?

No, a default is not the same as a County Court Judgment (CCJ).

A default notice is applied when a credit agreement is broken due to missing payments or not paying the full amount.

Meanwhile, a CCJ is when a creditor or company takes legal action by registering a Court Order, specifically a County Court Judgment (CCJ), against you as a result of a defaulted debt. For more information, you can read our in-depth guide on CCJ’s and how they impact you.

Can I reduce the negative impact of a default?

Even if you can’t afford to pay the default right away, or are worried about having a default on your credit file, there are things you may be able to reduce the impact of a default on your credit file.

Repay what you can

Try to pay off what you owe as soon as you can. This shows that you’re trying to clear the debt. Once the full balance is paid, it will be marked as ‘satisfied’ on your credit report, which is what lenders will see.

We know that everyone’s circumstances are different and that paying off your debt may seem difficult, but once you get in touch with Lowell, we’ll do our part to make sure that your payments work with your budget and help you to clear your Lowell debt. You can use our budget calculator to work out how much you can afford to pay, and work with Lowell to start working towards clearing your Lowell debt.

Add a note to your file

Sometimes it may be that there were changes in circumstances beyond your control when the default happened. If this is the case for you, you may be able to ask the Credit Reference Agencies if they will add a note to your file. This helps provide additional context for possible future lenders.

For example, if you fell into debt and your account defaulted because you were made redundant, or suffered a serious illness, you could add a note to help lenders understand the situation.

Look at improving your credit score

Your credit history is also used to create a credit score, based on the information in your credit file. You might be able to take steps to improve your credit score, which can help to reduce the impact of a default on your credit history. These steps include things like making sure you’re registered to vote and checking that your accounts are using the right address for you.

If you’re a Lowell customer, you can check your credit score via our mobile app due to our partnership with Transunion.

Speak to your creditors

Having a default on your credit file might be worrying, especially when you’re already dealing with debt. We know it’s not to reach out but once you get in touch with your creditors and explain your situation, they may be able to offer you support with your debt.

For example, they may be able to review your payment plan. Or, in rare cases, they could offer you breathing space which will give you some time to get your finances in order.

At Lowell, we can help you work towards clearing your debt with us and reducing the impact that a default has on your credit file. We can also offer you support and help you establish a payment plan that works with your budget, to make it easier for you to repay your Lowell debt.

Start your journey to becoming debt-free with Lowell today by getting in touch with our team to sort out a sustainable payment plan with Lowell. For more information about debt and working with Lowell, check out our Debt Guidance section.

First Published: 27th November, 2020
Updated: 20th February, 2024