Defaults & The 6 Year Rule

uphill1struggle

Hi,

I have a loan agreement on my credit report that I defaulted on in Oct 2006. I am paying it back in such small amounts that it will take 20 years to repay at the current rate.

In actual fact my finances have improved and rather than increase my repayments I am busy saving up so I can eventually offer a F&F settlement. This is going to take me a couple of years though.

So my question is this:

- In Oct 2012 will my defaulted account disappear from my credit report completely, or if I owe money will that still show? Will it show as a normal credit account, not a defaulted one?

- Would my CRF be better off in the long run if I made my F&F settlement before the default disappeared or after? In other words, would settling the account early somehow prolong the length of time this account appears on my file by another 6 years?

Cheers,
UHS

MyLastFiver

It depends. If you are still behind with payments then the loan provider may enter defaults on your file in the meantime. In fact, it surprises me that they haven't.

Settling the loan early will have no detrimental effect on your credit file.

debtstressed

MyLastFiver wrote: »

It depends. If you are still behind with payments then the loan provider may enter defaults on your file in the meantime. In fact, it surprises me that they haven't.

Settling the loan early will have no detrimental effect on your credit file.

Hello MyLastFiver.

Am interested in your post. So are you saying that if you get into difficulties and default then enter into a repayment arrangement with the lender, the lender can keep adding defaults to an account they already marked as defaulted? Do you mean that until the account is repaid the creditor can add a default every month and effectively only stop when the account is paid off? So if I default today and enter into a repayment plan which takes 5 years, infornation about the account and its defaults will only fall of my credit file 11 years from now? :eek:

Just curious. As for paying off the account I know that it wont have an adverse effect on someones credit file.

fermi

The lender can only default your account ONCE. That will have a specific date recorded on it, and all details of that account/default will be removed from the CRF 6 years from that initial date regardless of anything else.

While the account is still unsettled the lender can update the monthly status code every with with a "D" or "8", but that IS NOT the same as adding a fresh default each month. Many many people get confused on this point and think they are adding new defaults by doing that. They are not.

fermi

uphill1struggle wrote: »

- In Oct 2012 will my defaulted account disappear from my credit report completely, or if I owe money will that still show? Will it show as a normal credit account, not a defaulted one?

It will be simply removed altogether 6 years after the initial recorded default date.

uphill1struggle wrote: »

- Would my CRF be better off in the long run if I made my F&F settlement before the default disappeared or after? In other words, would settling the account early somehow prolong the length of time this account appears on my file by another 6 years?

In the long run no difference at all. It will be removed from the records in 2012 regardless.

debtstressed

fermi wrote: »

The lender can only default your account ONCE. That will have a specific date recorded on it, and all details of that account/default will be removed from the CRF 6 years from that initial date regardless of anything else.

While the account is still unsettled the lender can update the monthly status code every with with a "D" or "8", but that IS NOT the same as adding a fresh default each month. Many many people get confused on this point and think they are adding new defaults by doing that. They are not.

Thanks for that! I have learnt something today. Hope it helps the OP.

MyLastFiver

Wow. I have learned something new too. Still confused but will start my own thread about it.

Sorry OP - didn't intend to give you a heart attack by misleading you...

uphill1struggle

Thanks for the replies,

I always thought that this was a simple matter and when I started by DMP I was told that after 6 years (and a bit) my credit report would be clean and I could start again. Not that I have any desire for loans or credit cards, but I would like to remortgage with a high street lender one day.

But then I got confused by various snippets of information suggesting that account information remained on the CRF until 6 years have passed since they were settled... leading me to wonder if it was worth dragging out the settlement date until the default had been removed.

To quote Martin's credit report guide:

Some defaults or missed payments.

Usually, these stay on your file for six years, so anything before that may be wiped off. However, if you close an account, then missed payments could remain on your file until the sixth anniversary of account closure. With bankruptcy, it is wiped six years from the date you're declared bankrupt, as long as you're been discharged from the bankruptcy.


I am not behind on payments that I agreed with the Debt Collection Agency, but naturally I'm a long way behind the original payment terms of the HSBC loan.

Cheers,
UHS

fermi

uphill1struggle wrote: »

However, if you close an account, then missed payments could remain on your file until the sixth anniversary of account closure.

That applies to an account where there may have been some missed payments, but the lender has not formally issued/recorded a default.

In that case the records would stay for 6 years from the account settlement.

However, if the account is formally defaulted by the lender, that draws a line in the sand there and info only stays on your file for 6 years from that point. Even if the account is not settled till later.

From the horses mouth.....

How long will information stay on my Credit File?

Credit agreements:

Six years from the date the account was settled, written off or defaulted – whichever happened first

The "happened first" is critical you see. If the account is formally defaulted that marks the start of the 6 years, rather than it being the settlement date.

debtstressed

fermi wrote: »

However, if the account is formally defaulted by the lender, that draws a line in the sand there and info only stays on your file for 6 years from that point. Even if the account is not settled till later.

QUOTE/]

Hello Fermi

Does that mean if uphill1struggle or anyone decided to stop or could not continue paying after the default is removed (6 years) there is nothing the lender can do? Can the lender still decide to take him to court and get a CCJ against him?

What is the above happened before the 6 years are up? I'm really trying to understand how these things work!

Thanks for the info!

fermi

debtstressed wrote: »

Hello Fermi

Does that mean if uphill1struggle or anyone decided to stop or could not continue paying after the default is removed (6 years) there is nothing the lender can do? Can the lender still decide to take him to court and get a CCJ against him?

What is the above happened before the 6 years are up? I'm really trying to understand how these things work!

Thanks for the info!

The lender can still go for a CCJ.

That would go back on your credit file then, but under the court judgement section rather than the credit account section.

The default/account details would still go from the credit account section 6 years from the default, but the CCJ would stay for 6 year after the date it was granted.

So you can't just stop paying with no repercussions once any default has dropped off. But the lender would need to go to court to damage your file further.