In these tough financial times even the hardiest of money savers can find themselves getting into debts. There are more short term loans available with high interest rates that can suddenly get out of hand and before you know it, there’s a black mark on your credit score. If you are worried about defaults and CCJs then this guide should help ease your mind.
What is a default or CCJ?
A default is a mark that any company you have taken credit from can put on your credit score. They have to give you a warning that they are doing this due to missed payments, before it will take place. Many credit companies will give you a time frame to pay the full amount back before they put a full default on your account.
A CCJ stands for County Court Judgement and is when a company decides to take you to court for the money that you owe them. This can happen in really extreme cases when you have defaulted on your account many times, or they may decide to go down that route as the first port of call. You will be sent a letter detailing your court details, which you can then decide to appeal or set up a payment plan towards.
Both a default and a CCJ can seriously damage your credit report and even stop you from getting any more credit in the future. It’s important that you deal with these as soon as possible, so that they do not get out of hand.
The best way is prevention
The best way to get rid of a default or CCJ is actually not to get one in the first place! It may sound easier said than done, but as long as you keep in contact with your creditors then it should actually be quite easy. If you are having financial difficulties then make sure you let them know as soon as possible. They may ask for a break down of your income and expenditure, as well as any proof of earnings. You can then agree to a payment plan that they will be happy with and that you are able to afford. Just by showing a willingness to pay will keep the company happy and the debt collectors off of your back!
If you already have a default or CCJ
Both of these marks on your credit score can last for up to six years before they drop off, even if you are paying them back. It is important to talk through with a professional as to how long you can expect your default or CCJ to sit on your credit score for and what to do if you need credit in the future. This is especially the case if you plan to take out a mortgage or something similar soon. The only other way to get rid of a default or CCJ before the allotted time frame is to become bankrupt or insolvent. According to new laws, the bankruptcy will now only stay on your file for one year which could make a huge difference compared to six! There are some implications to becoming bankrupt though, so it is essential that you find out all the details from an expert before taking the plunge and declaring yourself so.
Gareh Cheesewell is a business advisor and from working with businesses of all niches he understands the financial pitfalls that we can all fall into from time to time. He recommends seeking professional advice when unsure of options are open or steps to take for your business.