6 years?

jon25MK

When a default is put on your record - who sets it stays on for 6 years?

I understand there needs to be a penalty for not paying debt and have myself got defaults that I have now paid and been debt free for 3 years.

For me now it seems 6 years is a very long time and the system doesn't seem to be working (more and more people going to pay day loans due to unhelpful banks)

I think if someone went 12 months without obtaining more finance or defaulting they should have a clean slate

Tixy

Credit reference agencies are regulated by the ICO.

In terms of public information - CCJs, bankruptcy, electoral roll information - that being on for 6 years is allowed by legislation.

I believe that in terms of other data it is the credit reference agencies themselves that have decided to keep it as long as 6 years. 6 years is the agreed industry standard (agreed with the ICO).
They could keep it for less if they chose, but I assume that their customers, UK lenders prefer them to keep it for the 6 years. And of course you give permission for it to be shared with the CRAs when you apply for credit.

6 years is a sensible time as it ties it with quite a lot of legislation (e.g. also with the Limitation Act (in England/Wales)) and the Data Protection act.

I personally think 12months would be no where near enough of a record for lenders to make lending decisions. I suspect if that was the case then it would significantly slow down the consumer lending market, and take us back to a time where to get mortgages and credit lenders would want to you have held savings accounts with them for a long time to be able to get a long term picture of your finances before agreeing to lend to you.

Particularly in terms of the mortgage market having a long period of credit history available is advantageous to most. I'm glad to have a choice of potential mortgage lenders to shop around at. My parents first mortgage they had to choose who might lend to them and save with that building society for several years before they could then ask that building society for a mortgage, no chance of getting one from anywhere else = no competition in prices.

The_Boss

A default is a serious issue so 6 years is a fair period of time for it to stay on.

If you satisfy a default, it helps. Perhaps a satisfied default, if satisfied within a few months, should come off after 4 or 5 years?

But consider this. I could miss 2 payments on two of my cards. I could then close them (aka settle them) and the late payment data would be on my report for 6 years until the account falls off. So why should I be penalised but not someone with a default?

Some more food for thought - late payments can potentially be on a credit report for up to 11 years. A default drops off 6 years from the date of default, wiping all negative data associated with the account.

matttye

A person probably couldnt obtain more finance for the 12 months that a default would stay on their file, because of the default. Would that be a lesson learned or just having no choice in the matter?

Six years feels like a long time but defaults lose their effect somewhat with age anyway, especially if you've been sensible since then.

You-kip

matttye wrote: »

A person probably couldnt obtain more finance for the 12 months that a default would stay on their file, because of the default. Would that be a lesson learned or just having no choice in the matter?

Six years feels like a long time but defaults lose their effect somewhat with age anyway, especially if you've been sensible since then.

This is where things should change.

Getting a Default and that losing its effect after a certain period shouldn't happen.IMO a default should screw you over for a full 6 years which means no credit for 6 years.

rizla_king

matttye wrote: »

Six years feels like a long time but defaults lose their effect somewhat with age anyway, especially if you've been sensible since then.

A default doesn't intrinsically become less with time. It's the lender's own criteria that may place less emphasise on old defaults. Some may decide that a default over say 3 years old is not as issue if conduct since is good, while others may decide a default still on the report is an instant decline no matter what other factors may exist.

It's the call of individual lenders in the end.

matttye

You-kip wrote: »

This is where things should change.

Getting a Default and that losing its effect after a certain period shouldn't happen.IMO a default should screw you over for a full 6 years which means no credit for 6 years.

Where's the sense in that?

Defaults are used to indicate risk, not as a punishment, and that's how it should be. Clearly someone with three new defaults is going to be a higher risk than someone with three defaults about to drop off, who hasn't been in financial trouble for 5+ years.

It's too easy for the financially ignorant to get credit and default without knowing the consequences.

matttye

rizla_king wrote: »

A default doesn't intrinsically become less with time. It's the lender's own criteria that may place less emphasise on old defaults. Some may decide that a default over say 3 years old is not as issue if conduct since is good, while others may decide a default still on the report is an instant decline no matter what other factors may exist.

It's the call of individual lenders in the end.

Can't disagree with that, I'd just say the impact usually lessens over time (i.e. with most lenders).

rizla_king

You-kip wrote: »

This is where things should change.

Getting a Default and that losing its effect after a certain period shouldn't happen.IMO a default should screw you over for a full 6 years which means no credit for 6 years.

lenders make up their own mind how much a default matters. That is their call.

warwicktiger

Lets put it a different way. Suppose three years ago I had borrowed money from you and not paid it back, would you lend me more now?

shortcrust

Maybe six years is what's needed to understand that defaulting on debts is serious and that access to credit is not a human right.