Credit Score Basics > How many missed payments before a default?

How many missed payments before a default?

Wollit Team2 minute read · Updated 14th September 2024

Missing payments can seriously affect your finances and credit score in the UK. Here’s how missed payments lead to a default, what that means, and how it impacts your future borrowing.

What is a default?

A default happens when you don’t keep up with your loan or credit agreement. A default usually happens when you miss several payments, often after three to six months of not paying. You can default on many types of debts, such as personal loans, mortgages, credit cards, and even unpaid bills.

In the UK, a default is recorded on your credit report and can stay there for up to six years. It shows that the lender thinks you won’t pay back the money you owe.

How many missed payments lead to a default?

In the UK, you can expect a default notice after you miss between three to six payments. The exact number can vary based on the lender and the type of credit you have.

It’s very important to remember that it doesn’t matter how big the amount is. You can receive a default for missing payments on a £10 phone bill just as easily as you can for a £10,000 loan. And the impact to your credit score will be just as serious in both situations.

What does the default process look like?

The usual default process looks something like this:

When you first miss a payment, the lender may contact you to remind you.
If you keep missing payments, the lender will send you a formal notice. This usually happens after three to six months of missed payments and gives you a chance to fix the situation, often allowing at least 14 days to respond.
If you don’t respond or make the payments, the lender will record a default on your credit file. This can hurt your credit score and make it very difficult for you to open a new credit account or borrow again.

How can I prevent a default?

If you’re having trouble making payments, it’s very important to talk to your lender. They might offer to change your payment plan or give you some time to catch up, which can help you avoid a default.

Of course, the best way to avoid a default is to stick to making your payments in full and on time:

Make a budget that includes all your monthly expenses and income. This can help you keep track of your payments.
Set up direct debits for your bills and loan payments, to make sure that you pay on time.
If you think you can’t make a payment, contact your lender right away. Many lenders are willing to help you find a solution before a default happens.

How does a default affect my credit score?

A default can have a big impact on your credit score, making it harder to get loans or credit in the future. Here’s how it affects you:

A default can cause your credit score to drop significantly, as it shows lenders that you may be a risky borrower.
A default stays on your credit file for six years. Even after that, it can still affect your ability to get credit, as lenders may remember your past behavior.
With a default on your record, you might face higher interest rates or even be denied credit altogether.

However, the good news is that the impact of a default will fade away in time – lenders focus mostly on your recent credit history.

This is why it’s so important to have a rich credit history, so as to make any negative mark (like a default or a missed payment) less important in your overall credit picture.

The good news is that now there are many apps that can help you build and improve credit. One such app is Wollit.

Wollit works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor that matters for your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report that shows lenders you pay your bills on time, helping you reduce the impact of a single late payment in your overall credit file.