If you continually miss a payment on a debtor credit agreement, you will likely go into ‘default’. This means that your lender has decided that you are not going to pay this debt back, and has ended said agreement. Every lender will have different rules on how many debts their client can miss.
Your account will not go into default without warning. You will first receive a default notice, stating how much you owe at that time, as well as the terms you have broken, the date the payment should be made by and a clear explanation of the consequences if you do not comply. If you are able to pay this amount back, usually within two weeks, your account will carry on as normal and the lender will collect their debt repayments following your initial agreement. However, if you do not pay back the amount shown in the notice within the two-week period, your account will go into default and your lender can no longer collect payment from you. They can also demand the full outstanding balance (not just the overdue amount), start court action (CCJs), or start proceedings to repossess any assets within the agreement e.g. a car, house.
The default will stay on your credit report for six years, even if you manage to repay the debt. This can unfortunately result in future lenders being less willing to lend to you, as you will be perceived as a higher risk case. After six years the default will leave your credit report, whether you have paid the debt back or not.
Can you still apply for a mortgage with a default?
Over the six-year period, lenders will pay less attention to the default. This means it is still possible to apply for a loan or a mortgage with a default on your credit report – though please note it is unlikely to be successful if the default has been on your credit report for 2 years or less. Although, depending on the type of mortgage or loan, (e.g. the size of the deposit) some lenders may accept when the applicant’s default is – at least – 3 months old.
For advice on defaults contact View Finance today on 0333 320 8658 to speak with a specialist Mortgage adviser based in Derby but deal with the whole of the UK
Lenders will be more willing to go into an agreement if you have paid off the debt you were in the process of repaying whilst you went into default. The default will still show on your credit report; however, the negative impact is reduced.
If the default is small (under £500) and has been repaid, then some lenders will ignore it. Lenders may also ignore communications defaults for example, a phone contract.
If you have any further enquiries, or if you are interested in seeing if you are eligible for a mortgage with a default, contact us at View Finance on 0333 320 8658 or email us at info@viewfinance.co.uk today and speak to one of our experienced advisers.
