Bouncing back from defaults on your credit report

Happy man paying bills on his laptop in living room

If you have a default on your credit report, you might find it’s a bit harder to borrow money. However, there are ways you can lessen the negative impact. To help improve your chances of accessing credit, here are a few tricks that can help your credit report bounce back.

What is a default on a credit report?

A default is marked on your credit file when a lender closes one of your accounts due to missed payments. For instance, if you haven’t been able to keep up with your household bills for around three to six months (this will vary depending on the supplier), a utility or mobile phone provider might decide to close your account and stop you accessing their service.

How long does a default last for?

A default stays on your credit file for 6 years. It will remain there even if you clear your debt, so it’s important to try to avoid getting one altogether. If you do have a default on your credit report, it can make it trickier for you to borrow money. This could be in the form of higher rates than you were expecting, or simply not receiving any credit offers at all when looking for a loan, credit card or mortgage.

Can I get a default removed?

You can only get a default removed from your credit report if you can prove that it was an error. Get in touch with the credit referencing agency and explain the situation. The credit referencing agency should then get in contact with the lender to check the accuracy of your claim. They’ll add a ‘Notice of Correction’ in the meantime to signal to other lenders that the default may be a mistake.

If the lender realises the default is an error, your credit file will be updated. If they don’t agree however, the default will remain on your credit file.

Can I reduce the impact of a default?

Although the default will remain on your credit file for six years, there are a few things you can do to slightly lessen the impact.

  • Pay off what you owe – although this won’t remove the default from your file, once the debt is paid off it will be marked as ‘satisfied’. Although it doesn’t completely negate the negative impact, it will look better to lenders.
  • Offer an explanation – it is possible to get in touch with a credit referencing agency and ask them to add a note explaining the circumstances around your default, for instance being made redundant.
  • Wait it out – if you get your finances back on track, the negative impact of the default will reduce over time. So, after a few years, you may find you have more credit options again.

Can I rebuild my score in other ways?

Yes, concentrating on other ways you can improve your credit score could improve your access to credit. A few quick tricks include:

  • Register to vote – being on the electoral roll helps lenders verify your address and makes you appear more reliable.
  • Keep your credit utilisation low – if you already have a credit card, only spending 30% of your available credit limit each month can improve your credit score. However, this is only true if you’re making at least the minimum monthly repayment. More missed payments could make your credit report worse, so only borrow what you can afford to pay back.
  • Get a credit builder card – if you don’t already have a credit card and you think you’re back on track with your finances, you could check if you’re eligible for a credit builder card. These cards are often available to those with less than perfect credit histories. By using it for a few small purchases and paying it off in full each month, overtime you could rebuild your credit score.
  • Clear any outstanding debt – it’s not always easy to clear your outstanding debt. If you’re not sure where to start, our free coaching module on tackling your debts in myfreedom runs through a couple of different methods.

If you’re not sure your debt is something you can tackle yourself, you can also find a link to DebtSense in myfreedom. This is a free, completely confidential questionnaire that will let you know what options are available to you based on your circumstances. The details of your questionnaire are just for you and won’t be shared with anyone, unless you choose to do so.

Repairing your credit score can seem like a momentous task, but simply being proactive and taking action sooner rather than later can bolster your eligibility for loans, credit cards and mortgages in the future. For more advice, take a look at our article on 5 easy ways to improve your credit score.

Want to see if you can improve your eligibility for credit with myfreedom? Sign up for free today.