Credit card defaults explained
Key takeaways
A credit card default usually happens after you've missed payments for several months and broken the terms of your credit agreement.
Before registering a default, your lender must normally send you a formal default notice giving you time to catch up.
A default can stay on your credit file for six years and may make it harder to borrow money.
Contacting your lender early and seeking free debt advice can help you avoid more serious financial problems.
What does it mean to default on a credit card?
A credit card default occurs when you've failed to keep up with the repayments required under your credit agreement and your lender decides that you have broken the terms of that agreement.
Missing a single payment does not usually mean you've defaulted. In most cases, a lender will first contact you about missed payments and arrears before taking further action.
If the missed payments continue and you don't make arrangements to repay what you owe, the lender may issue a default notice and eventually register a default on your credit file.
A default is one of the more serious negative markers that can appear on your credit report. It tells other lenders that you've had significant difficulty managing credit in the past.
What happens if I miss a credit card payment?
Missing a payment can have consequences even if it's the first time it's happened.
What happens next depends on your lender's policies and how quickly you bring the account back up to date, but you could experience:
A missed payment marker on your credit file if the payment remains unpaid
Late payment fees, depending on the card provider's terms
Interest charges if you were previously benefiting from a promotional or introductory rate
The loss of promotional offers, such as a 0% interest deal
Contact from your lender by phone, email, text or letter
Additional checks on your affordability if the lender is concerned about financial difficulties
If you realise you've missed a payment, it's usually best to act immediately. Making the payment as soon as possible and contacting your lender can help limit the impact.
The longer an account remains in arrears, the more serious the consequences can become.
What is a default notice and when do I get one?
A default notice is a formal legal document that a lender must usually send before they can terminate a regulated credit agreement, demand full repayment, or take certain enforcement actions.
The notice will explain:
How you've breached the credit agreement
How much you need to pay to remedy the situation
What action you need to take
The deadline for putting things right
What could happen if you don't respond
Under the Consumer Credit Act, lenders generally have to give you at least 14 days after receiving the notice to remedy the breach.
There is no fixed rule on exactly when a lender must issue a default notice, but it typically happens after several missed payments and when the lender believes the account is unlikely to return to normal without intervention.
In practice, many lenders may consider issuing a default notice after you've been in arrears for around three to six months, although timelines vary.
If you receive a default notice, it's important not to ignore it. Contacting your lender straight away may help you agree an affordable repayment arrangement and avoid further action.
How long does a credit card default stay on my credit file?
A credit card default will normally remain on your credit file for six years from the default date.
This is true whether you:
Repay the debt in full
Partially settle the debt
Continue making payments under an arrangement
Have the debt sold to another company
Paying off the debt won't remove the default from your credit report before the six-year period ends. However, it can improve how future lenders view your financial situation because the record will show that the debt has been satisfied.
Once six years have passed, the default should automatically drop off your credit file.
Although the default will disappear, lenders may still ask questions about your financial history during future applications, particularly for larger borrowing such as mortgages.
How will a credit card default affect my credit score?
A credit card default is one of the most serious negative markers that can appear on your credit file. While credit reference agencies use different scoring systems, a default is likely to have a significant impact on your credit score and may make it harder to be approved for borrowing.
The effect is usually greatest in the first few years after the default is registered. However, as the default gets older and you demonstrate responsible borrowing habits, its impact is likely to lessen over time.
Will a default stop me getting a mortgage, loan or another credit card?
Not necessarily, but it can make borrowing more difficult and more expensive.
When you apply for credit, lenders assess your credit history to estimate the likelihood that you'll repay what you borrow. A default suggests you've previously struggled to meet your commitments.
As a result, lenders may:
Decline your application altogether
Offer a smaller credit limit
Charge a higher interest rate
Request additional information about your finances
The impact often depends on several factors, including:
How recent the default is
The amount involved
Whether the debt has been repaid
Your overall credit history
Your current income and affordability
Mortgages
A default doesn't automatically prevent you from getting a mortgage. Some specialist lenders may consider applicants with previous defaults, particularly if the default is older and has been settled. However, you may face fewer choices and higher interest rates than someone with a clean credit record.
Loans
Personal loan providers often view defaults as a sign of increased risk. You may find it harder to qualify for the most competitive rates.
Credit cards
Mainstream credit cards may be harder to access following a default. However, some credit-builder credit cards are designed specifically for people with impaired credit histories.
How can I stop a default happening?
The earlier you act, the more options you'll usually have. If you're worried about keeping up with your repayments, consider the following steps:
Prioritise minimum payments: Even if you can't afford to pay off a large amount of your balance, making at least the minimum payment can help prevent your account from falling into arrears.
Set up a direct debit: A direct debit can reduce the risk of accidentally missing a payment. Many card providers allow you to automate either the minimum payment, a fixed amount or the full balance.
Create a budget: Review your income and essential spending to identify areas where you might be able to free up money for debt repayments.
Reduce unnecessary borrowing: Avoid taking on additional debt if you're already struggling with existing repayments.
Contact your lender early: Many lenders have dedicated teams trained to support customers experiencing financial difficulties. The sooner you get in touch, the more options may be available. Your lender may be able to offer temporary measures such as:
Reduced payments
A short-term payment arrangement
Breathing space while you seek debt advice
How long will it take you to pay off your credit card debt? Use our credit card debt calculator to find out
What if I can’t afford my payments right now?
If you're worried that you may miss an upcoming payment, don't wait until the due date has passed.
Contact your lender as soon as possible and explain your situation honestly.
Be prepared to discuss your income, essential household expenses, other debts and recent changes to your circumstances.
For example, you may have experienced a job loss or reduced income, illness, a relationship breakdown or unexpected financial emergencies.
Your lender may ask you to complete an income and expenditure assessment so they can understand what you can realistically afford.
You should also consider seeking free, independent debt advice. Debt advisers can help you understand your options, communicate with creditors and create a plan to manage your debts.
If you're struggling with problem debt, a debt adviser may also be able to help you access the Breathing Space scheme. This government-backed scheme can provide legal protections from most creditor action, including interest and charges on qualifying debts, for up to 60 days while you seek debt advice.
Several charities offer free advice for people struggling with debt. These include StepChange Debt Charity, National Debtline, Citizens Advice and Christians Against Poverty.
You can also get face-to-face debt advice from local charities or you can use the MoneyHelper debt advice locator to find free support in your area. Just remember to check the service is free before you start.
Ignoring the problem is usually the worst option. The sooner you seek help, the easier it may be to avoid more serious consequences.
I already have a default. What can I do next?
Having a default doesn't mean your financial situation can't improve.
Many people rebuild their finances successfully after experiencing credit difficulties. Options include:
Make a repayment plan: If the debt remains outstanding, try to agree a realistic repayment arrangement with the lender or debt owner. Consistent payments can help prevent further collection activity and demonstrate that you're addressing the problem.
Keep up with current commitments: Paying all your current bills and credit commitments on time can help establish a more positive payment history going forward.
Check your credit reports: Review your credit reports regularly to ensure the information being reported is accurate. If you believe a default has been recorded incorrectly, you can raise a dispute with the credit reference agency and the lender.
Consider a credit-builder credit card: Once your finances are stable, a credit-builder credit card may help demonstrate responsible borrowing behaviour. Only borrow what you can comfortably afford to repay and aim to clear the balance in full whenever possible.
Avoid multiple applications: Submitting several credit applications in a short period can make lenders think you're struggling financially. Instead, use eligibility checkers where available. These use a soft credit check to show you your chances of approval before applying.
Focus on the long term: Defaults eventually become less significant as they age, especially if you've maintained a positive payment record since the problem occurred. Rebuilding credit takes time, but consistent financial management can make a substantial difference.
Where can I get free debt help?
Several organisations offer free, confidential debt advice in the UK. These include:
These organisations can explain your options, help you create a budget and support you in dealing with creditors.
Seeking advice does not affect your credit score and can help you make informed decisions about your finances.
Other useful guides
If you’re looking for further information on credit card debt, we have a number of guides that can help. These include:
Compare credit cards with MoneySuperMarket
Whether you're looking for a balance transfer card, a purchase credit card or a card to help build your credit history, comparing deals with MoneySuperMarket is quick and straightforward.
Tell us a little about yourself, your finances and what you want from a credit card, and we'll show you personalised offers that match your circumstances.
You'll only know your exact credit limit after you've been approved, but you can compare cards by features such as interest rates, introductory offers, rewards and your likelihood of being accepted.
Once you've found a card that suits your needs, simply click through to the provider to complete your application.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this service. Instead we are usually paid a fee by the lenders, but the size of that payment doesn’t affect how we show products to customers.
Frequently asked questions
What should I do when my lender contacts me about arrears?
Try not to ignore letters, emails or phone calls from your lender. Explain your circumstances honestly and provide accurate information about your income and expenses.
It's often useful to ask:
How much you currently owe
Whether any fees or interest have been added
What support options are available
Whether a temporary repayment arrangement can be agreed
Keep copies of letters and emails, and make notes of any phone conversations, including dates, times and the name of the person you spoke to. Having a written record can be helpful if there is any confusion later.
Can my debt be sold to a debt collector, and what does that mean?
Yes. Lenders sometimes sell unpaid debts to debt collection agencies. If this happens, the ownership of the debt may transfer to the new company, which will become responsible for collecting the money owed.
The debt does not disappear simply because it has been sold. The new owner must still follow relevant regulations and treat customers fairly. You should receive notification if ownership of the debt changes.
If you're unsure whether a debt collector is legitimate, ask for written confirmation and details of the debt before making payments.
Could it end up in court or a County Court Judgement (CCJ)?
In some cases, yes. If a debt remains unpaid and other attempts to recover the money have been unsuccessful, the creditor may decide to take legal action.
If court action is successful, a CCJ could be issued against you in England and Wales. A CCJ can have a serious impact on your credit file and may make it more difficult to obtain credit in the future.
However, court action is generally considered a later-stage option rather than something that happens immediately after a missed payment.
Responding to correspondence and engaging with creditors can often help prevent matters from escalating.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
Reviewer
Alan Cairns
Senior Content Editor
Alan breaks down money, home, and energy topics into plain English to help you save money. Ask him about pound cost averaging or Balkonkraftwerk.
