Glossary · UK
What is Default (Credit File)?
A marker added to a credit reference file when a borrower falls seriously behind on a debt and the lender formally treats the agreement as broken down, remaining visible to other lenders for six years from the default date regardless of when the debt is later paid.
Full Definition
A default is a marker recorded on a person's credit reference file by a lender when they have fallen significantly behind on payments -- typically around three to six months in arrears, though the exact point varies by lender and product -- and the lender has concluded that the credit agreement has effectively broken down rather than simply being temporarily late. Before registering a default, a lender is required to send formal notice giving the borrower a defined period, commonly at least 14 days, to bring the account up to date or make contact to arrange a solution, and only if the arrears remain unresolved does the default get recorded with the credit reference agencies. Once registered, a default remains visible on the credit file for six years from the date the default was recorded, not six years from when the debt started or was eventually repaid, meaning even a debt that is paid off in full shortly after the default is recorded will still show as a "satisfied" default for the remainder of that six-year period, which continues to affect the ability to obtain new credit at competitive rates during that time, since lenders view a recent default as a significant indicator of credit risk. A single default typically has a substantial negative impact on credit scoring models, often more significant than several individual late payment markers, because it represents a lender's formal conclusion that the borrower could not maintain the agreement, rather than just an isolated missed payment. Worked example: a borrower falls behind on a credit card after a period of reduced income, and after four months of arrears and a formal default notice giving 14 days to resolve the situation, the lender registers a default in month five; the borrower pays off the full outstanding balance the following month, and the entry updates to show as "satisfied," but it remains on their credit file, visible to any lender assessing a new mortgage or loan application, for six years from the month the default was originally registered -- not six years from the month it was repaid -- meaning it continues affecting new credit applications for most of that period even though the underlying debt itself was cleared quickly.