Do defaults always mean you won't get credit?

[PhiltheBear]

The response is deafening:rolleyes:

 

Once again they have us by the short n curlies:mad:

 

I have noticed the bank workers on the MSE site are a bit more vocal8-)

 

I think that one reason there's no response is because there isn't a simple answer. For example, what does he need to borrow? How much? For what reason?

 

The overriding reason would be that there isn't a simple answer. All lenders operate their own system of credit scoring (and some of them are pretty crap). However, in general, they will take into account CCJs (usually a CCJ will block any lending) and defaults. However, the credit reference agencies supply different levels of information to different clients. The lender may just see a default. Or he may see how much the default was for. And when it was paid off. These various things may be factored into the credit score.

 

Unfortunately, you cannot find out how a particular institution credit scores. They are under no obligation to tell you. Which is a total bummer.

 

What you can do is put onto your credit records a 'Notice of Correction'. Basically this is a short piece of text that you add against a default explaining why it's there. Lenders must read these and take them into account when making a lending decision. That's a matter of law. Doesn't mean they'll lend - but it does mean that if your circumstances were different e.g. you were hospitalized at the time and couldn't work - they may look at your case in a different light.

[PhiltheBear]

Hi Philthebear,

" However, the credit reference agencies supply different levels of information to different clients." is that down to how much the client is prepared to pay for the info?

Or how much info they need to then look at if they can be bothered with you?...

 

Bizarrely enough - neither! If you have a business that offers credit you can enter into a relationship with a credit reference agency at one of two levels. The lower level means that you simply have the right of enquiry and the amount of information you get is (not very) limited.

 

The higher level means that you supply information back to the agency as well as receiving it. If you do this you can, depending on the agency, get monetary information about whole loads of transactions. For example, if you owe money on a loan the loan company can supply your monthly balance, whether or not you paid on time, how much you paid, etc.

 

And now - BE AFRAID, BE VERY AFRAID - the banks, with at least the connivance of one agency, will be circulating, initially amongst themselves, details of your monthly account deposits. The rationale behind this is that by examination of a monthly deposit a lender can extrapolate your annual earnings (after deductions) and thus make a 'better' judgment of the risk you pose as a borrower.

 

You should also be aware that the clearing banks have accounts with ALL credit reference agencies. Other lenders usually only use one. Therefore, it is possible that a default with one company may not show on all agencies' records. If you approach a lender who doesn't use the agency where it does show you may be considered perfectly OK.

[PhiltheBear]

After 6 years, you can no longer be chased for a debt, I don't know if its physically removed from your credit file, perhaps someone who knows will answer:) , I would be interested to know, as I have a ccj from 2002, will it stay there for all to see? coz with defaults for late payments etc being put on the report, mine's going to be reems long;)

 

You don't have a 'credit file' as such. There are 3 credit reporting agencies who gather information about you. One source of data is CCJs. If you don't "satisfy" the CCJ by paying it, it stays on your record for 6 years, after which it should disappear. However, the credit agencies may take a month or two before this happens (and, no, you have no redress if they are slow).

 

You CAN be chased for a debt after 6 years. However, it's very rare and usually only if the debt was big enough to be pursued in a High Court rather than a County Court. (Been there, done that!)

 

Defaults also stay for 6 years. So, you have to wait 6 years from your latest default before it goes.

 

The thing about banks circulating your earnings. This is currently only inter-bank. Will that change? Don't know. But I think that if it does it'll be a few years away. The problem is that when you sign up for anything finance related there's always a clause about them sharing financial information - and there is no limit as to what that information is.

[PhiltheBear]

Not if it's covered by S5 Limitation Act 1980. Doesn't matter how large the debt is.Do you have any case law or statutes to clarify?

 

For a 'normal' contract there is a 6 year limitation. For a 'specialty' (for example a deed) the limitation is 12 years. The textbook example is Bristol and West making a claim on a person whose house was repossessed and yet there was still a shortfall in the amount recovered by selling the house against the amount owed. They sued - they won. However, there is a possibility that this may be appealed (but the Act is quite clear on this point and appealing it would seem to be a waste of money).

 

Also, if there was no fixed period for the repayment of a loan the six years starts from the point at which the lender made a demand for his money back - not from the time of the loan. So, if you have a bank overdraft which started, say, in 2002 and the bank calls it in now then the six year limitation starts now - not from 2002.

 

There is another possibility which may complicate matters. It may be the case that if you were sued by person A and the court gave a judgment against you and you didn't pay and interest accrued that person A could sell that debt to person B. If person B then sues he may be able to start the six year clock again. The Act seems to provide for this to happen because the overall debt would now be a different debt with a third party. I think it's very unlikely that this would happen but a quick reading of the Act would seem to allow it. (But I'm not a lawyer - thank the Lord ).