What is a default, and what effect will it have on my credit rating?

If you fail to pay a debt that you`re expected to repay, you may `default` on that debt.

This can be a serious situation, but there are things you can do. If you`ve defaulted on one or more of your debts - or even if you think you`re about to - it`s important that you get help as soon as you can.

What happens if I default on my debts?

If you miss payments on your debts, it`s important that you act fast. The sooner you address the situation, the less damage will be done to your credit rating.

Most lenders will only issue a default notice after three to six months of missed payments. A default notice is a formal letter warning you that you are behind on your debt repayments: it will give details of what payment is expected and by what date, in order to remedy the default.

If the default is not satisfied (arrears repaid) this default notice will be registered on your credit history, and like any entry on your credit history, and this will remain visible for six years. This is likely to make borrowing money much more difficult in the future.

If you can`t catch up after receiving your default notice(s), your lenders may decide to take action against you to recover their money - but there are things you can do before that happens.

What should I do if I can`t get back on top of my debts?

The first thing you should do is contact your lenders. They may agree to some kind of `repayment holiday` (depending on your circumstances) to give you time to get your finances back on track, or they might agree to a longer-term informal repayment arrangement, in which you`ll pay less than your expected monthly payment.

If you can`t reach an agreement with your lenders on your own, it`s time to get independent debt advice. A debt adviser can help you to find a debt solution that`s right for your circumstances, and they`ll be able to speak to your lenders on your behalf.

For more help with your debts, or for information on debt solutions that could help, click here or call today on 0800 161 3516.