Maybe you’ve been refused credit and found out your credit score is way lower than expected. Or you’ve missed a few payments and are wondering if you can erase them from your credit report.
Whatever your circumstances, having a low credit score can be expensive, especially if you’re considering borrowing money to buy a car or a house, so you should do all you can to improve it. Unfortunately, there are no easy fixes, but checking your credit history, correcting mistakes and committing to healthy financial behaviour (plus reading this guide!) are the first steps in the right direction.
How to remove blemishes and credit report errors
A negative item on your credit report can only be removed if the information listed is inaccurate or if it’s outstayed the rightful duration. When legitimate black marks are on your credit report, the only thing you can do is give them time and wait for them to be removed – most negative marks stay on your report for 6 years.
To improve your chances of clearing inaccurate marks from your credit report, follow these 3 steps:
Step 1. Get a copy of your credit report
To kick things off, request a copy of your credit report from any or all the credit reference agencies (CRAs): Equifax, Experian and TransUnion. Once you’ve received a copy (or copies) of your credit report, start looking through your history to identify any black marks or defaults.
Keep in mind that the details on your credit report may vary between each agency, so cross-checking between reports to confirm complete accuracy is recommended.
Step 2. Identify the black marks and defaults
The term “black mark” refers to any information on your credit report that may throw up a red flag for potential lenders. Some black marks can have a worse impact than others. For example, defaults can have more of a detrimental effect to your credit score than 1 or 2 missed payments.
When you receive your report, these are the negative items to look for:
Being at your credit limit. Regularly borrowing the maximum amount available (for example, up to your credit card limit) could mean you’re in financial difficulty and send a negative signal to potential lenders.
Missed payments. Your credit report retains negative payment history for up to 6 years. This means any missed payments on your mortgage, loan or credit card will likely show up on your credit report, lowering your credit score and hurting your chances of obtaining new credit.
Defaults. A default is when a lender closes your account (such as a credit card) because you’ve missed too many payments (usually in the course of 3 to 6 months). It stays on your credit report for 6 years.
Individual voluntary agreements (IVA). If your debt gets too high for you to be able to pay it back, you could be able to enter an IVA, which is basically an agreement with your creditors: they’ll write off part of your debt if you commit to paying back a certain amount every month, for instance. An IVA severely impacts your credit score (again, normally for 6 years) and your ability to get credit, as lenders will often see you as a high-risk borrower.
County Court Judgments (CCJ). If you fail to repay the money you owe, you may be issued a court order. Once you receive one, it stays on your credit report for 6 years unless you pay it back in full within 30 days after you’ve received it.
Bankruptcy. If you can’t come to an agreement with your creditors, you may have to file for bankruptcy. Again, this will show on your credit report for 6 years and heavily impact your chances of borrowing money.
Credit inquiries. Credit inquiries (including personal loans, mortgages and credit cards) usually remain on your credit report for 12 months, regardless of whether they’re approved. They’ll have a much lighter impact on your credit score than any of the above black marks, but they still send a negative signal to potential lenders because if you make too many applications, it may look like you’re desperate for credit. That’s why it’s important to space out your applications and only apply for credit you have a high chance of being approved for.
Step 3. See if you can remove the black marks and defaults
Removing the black marks and defaults is a long process, and in most cases, there is nothing you can do except wait for the 6 years to pass.
However, there may occasionally be mistakes in your credit report that could be damaging your score. After you’ve requested your report and identified the negative items, here’s what you should do:
Check for incorrect listings. Lenders can sometimes make incorrect listings by mistake. For example, they may report the same debt twice, list it on the wrong person’s account or incorrectly list a debt as a default.
Report any errors. If you come across any errors on your credit report, you can initiate an investigation by filing a dispute with the CRA (or CRAs) that have this mistake on file. The CRA will verify your claim, contact the lender and, if you’re right, amend your report.
Add a notice of correction to your credit report. If you report an error in your credit report but your claim isn’t accepted, the credit agencies will still allow you to argue your side with a 200-word notice of correction you can attach to the report. It won’t help your credit score, but lenders will be able to see it.
If, instead, the report is correct, fixing your credit score will be harder work. It’ll involve waiting for the worst black marks to “expire” and maintaining a healthy financial behaviour that can have a positive impact on your credit score throughout. Consider:
Negotiating with your credit provider. If existing credit accounts are part of the problem, get in touch with your credit provider and try to negotiate a repayment plan that’s manageable for you. This will help reduce missed payments and prevent debts from becoming defaults on your credit report.
Getting external help. Debt problems can be really difficult to manage by yourself. Consider, for example, going to Citizens Advice for help. It will be able to point you towards the right direction.
What about credit repair agencies?
Credit repair agencies will go through your credit reports for you, analyse them, look for any potential mistakes and help get them corrected. In some cases, they’ll also advise on what to do to improve your credit score, even if there are no visible errors. However:
They’re costly to hire. Weigh up the costs of credit repair against the possible value of the service. For example, the long-term benefit of a mortgage with favourable terms outweighs the short-term costs of hiring a credit repair specialist. But the benefit depends on the service being successful.
No guarantees. The agency will investigate your listings but cannot offer any certainty of removing them.
Some charities will give you debt advice for free. If you have a debt problem, your credit score is more the consequence than the cause of it, and a credit repair agency may not be the best way to seek help. A specialised charity or, in some cases, a debt management company will be a better option. Debt charities also offer advice for free.
Consider your credit report carefully and what may be realistically achieved through a credit repair agency before you take on the expense of this service.
How long does a default affect your credit score?
A default remains on your credit report for 6 years from the default date. This is the case even if you’ve repaid the debt. Once the default has been removed, the lender can’t re-register it, even if you still owe money.
However, there are steps you can take to help reduce the negative impact a default can have on your credit profile:
The first is to repay as much of your debt as you can, as once you’ve paid it off, the default will be marked on your credit report as “satisfied”. This could be viewed more favourably by lenders.
You could also ask to add a note to your credit report to explain why you got into debt – this could be particularly useful if you were made redundant, for example, or you were suffering from a long-term illness.
Over time, your default could become less of an issue to lenders, so you might find it easier to get approved for credit after the first couple of years. Your credit score will gradually improve as the default gets older.
What happens if you don’t pay a default?
If you don’t pay a default, the lender may register a CCJ against you. This would stay on your credit report for another 6 years and is generally regarded as worse than a default.
A lender could also sell your debt to a debt collector, but they’ll need to make this apparent on your credit report.
Settled defaults are generally regarded as much less of a problem than unpaid ones, and you’re more likely to get further credit in the future. If you don’t repay your default, you could find it much harder to take out credit again.
Bottom line
Black marks and defaults will remain on your credit report for 6 years. However, the impact on your credit score should diminish over time. If you have defaulted, the best thing you can do is to repay what you owe as soon as possible to prevent any further damage to your credit history.
Frequently asked questions
A default stays on your credit report for 6 years, even if you’ve paid it off. However, the default could become less of an issue for lenders as it gets older.
If there is an error on your credit report, you’ll need to contact the CRA to explain what’s happened. The CRA will then contact the lender to verify the accuracy of the data and add a notice of correction to your report. If the lender agrees a mistake has been made, your credit report will be updated.
If you’ve been a victim of fraud, you should alert your bank/lender and inform Action Fraud. If there is a mistake on your credit report because you’ve been a victim of fraud, you can also get in touch with your CRA.
In most cases, employers won’t be able to see you have a default. Most employers only check public data such as CCJs and bankruptcy. However, if you apply for a job with a lender or CRA, they might ask to run a full credit check on you, in which case, they would see any defaults.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
Learn the facts about loan applications and your credit score plus what you can do to minimise the impact.
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