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You service your car; why not service your credit file?

Friday, 19th November 2010

Keeping your credit file in tip top condition is a bit like servicing your car, if you don’t look after them both then they will eventually let you down, when you least expect it.

So if you are thinking about going on that journey of applying for credit then make sure you service your credit file first, one good way would be to tidy up or remove default notices and any wrong information.

What is a default notice?

A default notice is something that a lender puts on your credit file if you fall behind with your payments.

When you borrow money from any financial institution you usually sign an agreement, in the terms and conditions of this agreement you give permission that should you fall behind with your payments then the financial institution can inform the credit reference agency of this, hence the default notice.

Also, before a debt can be sold on, the lender has to demonstrate that that they have tried to contact you and keep the payments going, once you have two default notices against you then the debt can be sold on.

The default notice has nothing to do with a county court; it merely alerts future lenders that you have not kept up with the payments.

How to remove the default notice

There are several ways you can have a default notice removed, you will have to be patient and persistent but it is worth a try. To have them stay on your credit file will cause problems getting future credit, for some potential borrowers  it will be a complete refusal and for others a much higher interest rate.

The first step is to identify the financial institution (lender) that placed the default on your file; you may already know this, if not then do a credit search on yourself to see which one it is. How to see your credit report on-lin for £2.   

If any of the below apply then you have a chance, you should write to the lender that placed the default notice asking if they would consider removing it.

  • The loan has now been repaid in full
  • You have come to a new arrangement to repay the loan
  • The payments are now up to date and you are no longer in default
  • You can demonstrate that the default was placed incorrectly on your credit file.

If they agree to your request then ask them to confirm this in writing on their letterhead.

Some lenders may charge a small administration fee for the additional work.

If the lender agrees to your request then send a copy of their letter confirming such to one of the credit reference agencies asking them to remove the default notice from your file.

What if the information on your credit file is incorrect?

If the information is correct you cannot expect them to change it because it is embarrassing, only if it is incorrect can you do the following:

  • Write to the agency asking it to either remove or change the entry that you think is wrong.
  • Within 28 days from receipt of your letter the agency should tell you that it has either removed or changed the entry or taken no action.

Notice of Correction

If you are unhappy with the response or would just like to explain the information on your file you can send a Notice of Correction. This is a statement of up to 200 words that will be added to your file as long as it isn’t defamatory, frivolous or incorrect. Again the agencies have 28 days to respond.

If still no action, resend the Notice of Correction. If information is amended the agency must send details to any lender who has enquired in the last 6 months.

If an agency declines your Notice of Correction it then it must refer to The Information Commissioner

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