What Is A Default, And What Happens If You Get One?

A default on your credit file can feel scary, especially if you’re not sure what it really means or what to do next. At Marsh Finance, we speak to people in this position all the time. You're not alone, and you're not stuck.

Whether you've just received a default notice or you're worried one might be coming, this guide is here to help. We’ll break down what a default is, why it happens, what to expect if you get one, how it affects your credit score, and where to get support.

👉 What is a default?

👉 Why do defaults happen?

👉 What happens when you get a default?

👉 How does a default affect my credit score?

👉 What should I do if I've got a default?

👉 How Marsh Finance can help

👉 Default FAQs

What Is A Default?

In simple terms, a default is a formal notice that you’ve missed several payments on a credit agreement, like car finance, a credit card, or a loan, and your lender is taking further action.

It usually means:

• You’ve missed payments for at least three to six months
• Your lender has tried to contact you but hasn’t been able to resolve the situation
• The lender has now decided to close the agreement and mark it as ‘in default’ on your credit file

This is different from a missed payment, which might show on your file but doesn’t carry the same long-term impact. A default is more serious and will stay on your credit report for six years, even if you pay it off.

Why Do Defaults Happen?

Life happens, and sometimes money gets tight. Defaults often happen because someone is struggling financially, perhaps due to:

• Losing a job or having hours reduced
• Illness or health problems
• A relationship breakdown
• A major life event like bereavement or moving home
• Other debts piling up

The thing to know is defaults aren’t always about carelessness. They’re often linked to tough situations… things that can happen to anyone.

That’s why it’s so important to talk to your lender as early as possible. At Marsh Finance, we understand that circumstances change, and we may be able to offer help before things reach the point of default. If you’re worried, please reach out to our team.

What Happens When You Get A Default?

If your account reaches default stage, here’s what usually happens:

1. You'll receive a Default Notice

This is a formal letter giving you a deadline (at least 14 days) to pay the overdue amount or make an arrangement. It’s sent under the Consumer Credit Act 1974 and gives you a chance to put things right.

2. If you don’t pay by the deadline

The agreement will be cancelled. This means your lender can demand the full amount owed, take further action to recover the money, or pass your account to a debt collection agency.

3. The default is recorded on your credit file

It will appear on your report for six years, even if you later pay it off in full. This can make it harder to get approved for new credit, including things like mortgages, credit cards, or new car finance.

How Does A Default Affect My Credit Score?

A default can lower your credit score significantly, especially if your report was otherwise clean.

Here’s what can happen:

• You may be turned down for new credit or finance deals
• If you are accepted, you might be offered higher interest rates
• Employers or landlords who run credit checks might see the default

The good news? Your score can start to recover over time, especially if you take steps to manage your debts and avoid further issues.

We’ve written a full guide on what help is available if you’re struggling with car finance and it includes free advice options and links to support.

What Should I Do If I’ve Got A Default?

Don’t ignore it, and try not to panic. There are things you can do to move forward:

✅ Speak to your lender

If your finance is with Marsh, we may be able to help even at this stage. Depending on your situation, we might be able to agree on a repayment plan or explore other options.

✅ Check if you’re classed as a vulnerable customer

If you’re dealing with health issues, job loss, or a big life change, you might be classed as a vulnerable customer. That means extra support could be available.

✅ Prioritise your debts

Work out which debts are most important to keep up with, like rent, utilities, and priority loans. If you’re unsure, charities like StepChange, PayPlan and National Debtline can help you create a budget and a plan.

✅ Think about longer-term options

In some cases, you might want to explore a voluntary termination or voluntary surrender of your car finance agreement. These are legal ways to end your agreement early, though they come with different consequences, so it’s important to understand the difference.

How Marsh Finance Can Help

If you have a default with us, or you're worried you might get one, please don’t suffer in silence. We’re here to help, not judge. We know that behind every missed payment is a story. That’s why we take the time to listen.

We can:

• Work with you to understand your situation
• Look at repayment options that may be more affordable
• Offer support if you’re classed as a vulnerable customer
• Signpost you to helpful organisations

You can also read more about your rights if you’re in car finance difficulty.

Having a default on your credit file doesn’t mean the end of the road.

It’s a bump in the journey, one that many people experience. The most important thing is to take action early, speak to your lender, and get the support you deserve.

If you're with Marsh Finance, you're not just a number; you're a person, and we're here to help you through it.

Need support?
Visit our Customer Support Hub or speak to our team if you’re facing difficulties. The sooner you get in touch, the more we can do.

Frequently Asked Questions About Defaults

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