What is a default notice?
A default notice is a letter sent from your creditor warning that your account is about to default because you haven’t met your regular payments.
The notice will usually allow you to catch up with the missed payment(s), often giving you two weeks to do this. If you do, your account will carry on as normal and won’t go into default. However if you can’t pay the amount required in the time given, your account will default.
What happens after an account defaults?
There are several options your creditor may take to recover the amount you owe, including:
- Passing the debt to a collection agency
- Taking legal action against you
The default will also be registered with one or more of the credit reference agencies, appearing on your credit file for 6 years. This means that any creditor who checks your credit file in this time will see the default and may refuse your application or charge you higher than average interest rates, costing you much more than others.
In some instances, a default notice may affect your job. Some industries, such as financial services, regularly check your credit file and may refuse an offer of employment on that basis or dismiss you.
If you’ve received a default notice and are concerned about the impact on your finances and credit rating, click here to find out who you can speak to for advice.