Paying a defaulted account & your credit score (2024)

A reader asked if starting to pay a defaulted account will help his credit score. The simple answer is No!

But there are very good reasons why paying defaulted debts will improve your general credit situation, making it easier for you to get a loan, a mortgage or a credit card in future. That credit rating number isn’t the only thing that matters!

To start, it’s good to know what your credit history is nowby checking all three credit reference agencies.

Paying a defaulted account & your credit score (1)Six years is the important date

A defaulted account will drop off your credit record six years after the default date.

It doesn’t matter what happens after the default – whether you pay the account in full, start paying it, agree a partial settlement or don’t pay anything at all, the account will still be deleted after six years.

So find out what all your default dates are. If you think one is too late, read What Should the Default Date Be?which explains how to get an incorrect date changed.

Your credit record gets better after six years unless…

This may sound as though your credit score will get a lot better after six years even if you pay nothing. This is correct, but there is one big exception – your creditor may take you to court and geta County Court Judgment (CCJ). This CCJ would then stay on your file for another six years. Most lenders regard a default as bad but a CCJ as worse.

You may be hoping this doesn’t happen, unfortunately after five years and a few months, a debt collector may contact you and threaten court action if you don’t set up a payment arrangement. If you have moved and not told the creditor your new address, you could get a CCJ without being aware of it.

If this doesn’t happen and the defaulted account drops off, then your credit score will improve immediately. How much will depend on what else is on your credit record – if you have a lot of other debts still showing you may not notice the difference until the last ones go.

Older defaults are less bad for your credit score

Your credit record starts recovering from a default before the end of the six years. I asked Experian how their credit rating calculations changed as a default gets older. The following numbers show what happens to Experian’s credit score if there is only one default and if nothing else changes on your credit record:

  • in last 2 years – 350 points
  • 2-4 years ago – 250 points
  • 4-6 years ago – 200 points.

In practice there is almost always something else changing every month, so you shouldn’t expect to see those exact numbers but they give a feel for what is going on. For some more examples of how much different things affect your credit score, readHow much will my credit score change if… ?

Your credit score doesn’t improve faster if you settle the debt, but…

Most people will expect that if they repay a defaulted debt their credit rating will suddenly improve. This doesn’t happen. So you may wonder why you should bother!

There are two very important reasons to start to repay a defaulted debt.

  1. if you are making payments a lender is a lot less likely to go to court for a CCJ. A CCJ is much worse for your credit record than a default, and it would be on there for another six years.
  2. lenders all make their own assessments, they don’t just use a credit score. Many lenders regard a settled default, as much less of a problem. So by repaying a defaulted debt you are more likely to get approved for a new loan.

That last point is especially important for mortgage applications. You are very unlikely to get a mortgage at a reasonable rate if you have unpaid defaults. The sooner you can repay them the better.

Each lender sets their own rules, but a current rule of thumb is that if all your defaults are over three years old and they have been repaid for more than a year, it’s worth talking to a broker about whether a mortgage is possible.

This also applies to CCJs

Exactly the same applies to CCJs. If you pay them in the first month the CCJ will drop off completely. But after that if you repay the CCJ and get it marked as satisfied, your credit score will not increase at all.

Again there are good reasons to repay a CCJ – you won’t get hassle from bailiffs or money being taken from your wages. But you are stuck with the bad effect on your credit score for 6 years.

Is it worth making low payments to a defaulted account?

Low payments won’t make much of a dent in your debt, even if interest and charges are frozen. There are positive reasons in favour of token payments – once agreed with your creditors, they will reduce the hassle you get and also make it less likely that you will get a CCJ – but they aren’t going to improve your credit record or make it more likely you will get more credit.

If you expect your situation to improve, then low payments are a good option, but if this seems unlikely then you should probably look at what your alternatives are.

Will a consolidation loan help?

If you have poor credit, it is very rare for a consolidation loan to help.

Using it to repay some defaulted debts or debts with payment arrangements is not going to improve your score. And the loan is going to be expensive – it’s usually better to get a payment arrangement to repay defaulted debts as then no more interest is going to be added.

And getting a guarantor loan to consolidate debt can be a major problem – if you run into difficulty you will then be desperate to protect your guarantor.

It’s better to talk to a debt adviser before taking a consolidation loan.


So although the answer to the reader’s question was No – repaying defaulted debts won’t improve his credit score faster, this isn’t really the full picture. A better reply is:

Your credit score will improve gradually as your defaults get older. This doesn’t speed up when you repay a defaulted debt, but some lenders are only likely to lend to you once defaults have been paid. And starting to repay debts makes a CCJ much less likely, which would make your credit record worse.

Consolidating with bad credit?

Can you get a mortgage with your debts?

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Paying a defaulted account & your credit score (2024)


Paying a defaulted account & your credit score? ›

Your credit score will improve gradually as your defaults get older. This doesn't speed up when you repay a defaulted debt, but some lenders are only likely to lend to you once defaults have been paid. And starting to repay debts makes a CCJ much less likely, which would make your credit record worse.

Will paying off a defaulted improve my credit score? ›

Pay off what you owe – although this won't remove the default from your file, once the debt is paid off, they mark it as 'satisfied'. Although it doesn't completely negate the negative impact, it will look better to lenders.

What happens when you pay a defaulted account? ›

A default will appear on your credit file for six years, even if you pay off the debt in full. This means it'll be harder to get credit cards, loans or bank accounts. You may also find it harder to get other types of credit such as mortgages and even mobile phone contracts.

Can a default be removed if paid? ›

Once a default is recorded on your credit profile, you can't have it removed before the six years are up (unless it's an error). However, there are several things that can reduce its negative impact: Repayment. Try and pay off what you owe as soon as possible.

How much will credit score increase after default removed? ›

Put simply: removing one default from your Credit Report won't make much of a difference if you have additional defaults remaining. Only when all negative markers on your Credit Report have been removed will you begin to see any real improvement in your Credit Score.

How to increase credit score by 100 points in 30 days? ›

Steps you can take to raise your credit score quickly include:
  1. Lower your credit utilization rate.
  2. Ask for late payment forgiveness.
  3. Dispute inaccurate information on your credit reports.
  4. Add utility and phone payments to your credit report.
  5. Check and understand your credit score.
  6. The bottom line about building credit fast.

How do I clear my credit report for defaults? ›

You can only have a default removed if it was listed in error. A default will remain on a credit report for five years. If a default is paid, the status will be updated to 'paid' however it cannot be removed.

How long does a paid default stay on credit file? ›

Both consumer and commercial payment defaults stay on your credit report for five years, even when you have paid the overdue amount. The status of the default is updated to paid which can be looked upon more favourably by lenders but it will remain as part of your credit history. Looking for your credit file?

Can I have a good credit score with a default? ›

A single default can significantly impact your credit score, acting as a red flag to future lenders about your creditworthiness. It can take up to 350 points off your score, though its impact will reduce over time.

How many points does a default affect your credit score? ›

A missed payment on a bill or debt would lose you at least 80 points. A default is much worse, costing your score about 350 points. A CCJ will lose you about 250 points.

Is there any point paying a default? ›

Many lenders view a past due account that has been paid off more favorably than an account that is still outstanding, so paying off an account that is in default can be beneficial. Once the account reaches the end of that seven-year time period, it will be automatically removed from your credit report.

Is a default worse than a late payment? ›

Even if a late payment only reduces your score a little, it could take you beneath the lender's cut-off point for approvals. Sometimes, late payments can lead to a default or a County Court Judgment. These are likely to have a more serious impact on your credit score.

Can I get a mortgage with a default? ›

Getting a mortgage with a default can be more challenging and will likely affect the deals available to you, but it's not impossible. The main factors lenders will consider are whether the defaults are satisfied, how many you have, their value and how long ago they were registered.

Should I pay off a defaulted credit card? ›

Do nothing. You can choose to do nothing about your debt, but this is a bad idea. Eventually, the debt collector could sue you for what you owe. If they win the lawsuit, a judgment will be issued against you, and your wages could be garnished.

Can you bring your credit score back up? ›

The time it takes to improve your credit score will vary depending on your starting point and the cause of your credit score decrease. Also, taking specific financial actions such as paying down balances, limiting hard inquiries, and making on-time payments can help speed up the time it takes to improve your score.

Will my credit score go up if late payments are removed? ›

Late payments can remain on your credit report for 7 years. Still, one late payment isn't likely to reflect poorly on your creditworthiness permanently, as long as you generally make payments on time. And assuming good credit behavior, your credit score should rebound from a single late payment over time.

How long does it take to rebuild credit after paying off debt? ›

It can take weeks or even days for you to notice a change in your credit score. If you have recently paid off a debt, wait for at least 30 to 45 days to see your credit score go up. Will it be beneficial for my credit score if I pay off a debt? Your payment history will not be removed after you pay off a debt.

Is a satisfied default just as bad? ›

Your default becomes 'satisfied' when you finish paying off the debts you defaulted on. The sooner you can satisfy your defaults, the better. Mortgage lenders prefer satisfied defaults because it shows them you picked yourself back up after a blip in payments.

How long does it take to improve credit score 100 points? ›

Creditors typically report updated information monthly, so it is possible to improve your score by 100 points in 30 days. It will likely take several months for your score to realize its full potential, though. You can use WalletHub's free credit score simulator to learn how different actions can affect your credit.


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