A default is recorded when you fall seriously behind on a credit agreement and the lender closes the account. Defaults make car finance harder to get, but they don’t always rule it out. This guide explains how lenders view defaults and how to improve your chances.
In short
You may be able to get car finance with a default, often from a specialist lender at a higher rate. A default stays on your credit file for six years from the date it was recorded, even if you pay it off. Older, smaller and settled defaults are viewed less harshly than recent or unpaid ones.
What is a default?
A default is recorded when a lender decides an agreement has broken down, usually after three to six months of missed payments. The lender sends you a default notice first. Once the default is registered, it shows on your credit file.
How long does a default stay on your credit file?
Six years from the date of the default, whether or not you repay the debt. Paying it off doesn’t remove it early, but the account will be marked as satisfied or settled, which lenders view more positively.
If the default date looks wrong, for example much later than when you actually stopped paying, ask the lender to correct it. A later date keeps it on your file for longer.
Can you get car finance with a default?
Some lenders will consider it. They usually look at:
- How many defaults you have, and how recent they are
- Whether they’re satisfied
- How much they were for
- What type of debt they were, for example a mobile phone contract or a previous car finance agreement
- Your payment record since
- Affordability now
A default on a previous car finance agreement may concern a car finance lender more than a small default on a utility bill.
Important
Expect higher interest rates. Compare the total amount payable and make sure the payments are comfortably affordable. Missing payments on new finance would make your credit file worse.
How to improve your chances
- Check all three credit files (Experian, Equifax and TransUnion) and challenge anything that’s wrong.
- Settle defaults you can afford to clear, and check they’re marked as satisfied.
- Avoid multiple applications. Use eligibility checkers with soft searches.
- Save a deposit.
- Register on the electoral roll.
- Build a positive record with on-time payments on existing accounts.
Alternatives to consider
- Wait until the default is older or has dropped off.
- A cheaper car bought with savings.
- A guarantor, if someone trusted agrees and understands the risk.
- Free debt advice from StepChange or MoneyHelper if you’re still behind on other debts.
See bad credit car finance for more.
Defaults car finance FAQs
Does paying off a default remove it?
No. It stays for six years from the default date, but it’ll be marked as satisfied, which helps.
Can I get car finance with several defaults?
It’s harder, but some specialist lenders may consider it if the defaults are older and you’ve kept up payments since.
How soon after a default can I get car finance?
There’s no fixed rule. Chances improve the older the default is and the better your record since.
Will a default on old car finance stop me getting new car finance?
It may make some lenders cautious, but it doesn’t always rule you out, especially if it’s settled and a few years old.
Can I remove a default from my credit file?
Only if it’s wrong. If it’s accurate, it stays for six years. If you think it’s wrong, raise it with the lender and the credit reference agencies, and then the Financial Ombudsman Service if needed.