We often talk with people that have learned they have a default only after being declined for finance. Until this time they were completely unaware that they had a credit problem. So how do you get a default?
Lets first cover the basics of what a credit provider must do prior to listing a default. Firstly they must wait 30 days from the final bill to issue a demand letter; they must then wait a further 30 days before listing a default. The key here is the demand letter. Many people think that a credit provider must try and call them or send an email regarding an outstanding payment, while this would seem like a logical action for a credit to take the truth is they are not legally obliged to do this and in most cases, the only thing they will do is post a demand letter to the last known address.
As you can imagine, there are a number of reasons why someone may not receive a demand letter, a change of address being the most common. We often talk with people that have moved address and thought that a third party was looking after the payments of an account, a perfect recipe for a default to be recorded without them knowing.
It is important to note that a credit provider needs only mail a demand letter to the last known address for a client so if that person is no longer at that address they do not need to try and track that person down. While it is true that it is the client’s responsibility to update a credit provider of a change of address there are many examples of credit providers being informed of this but not updating their systems accordingly and posting letters to an old address, this situation happens regularly.
While it is a legal requirement for a credit provider to issue a demand letter sadly this does not always happen. Many credit providers miss this vital step so as you can imagine in these cases even the smallest misunderstanding about an account can lead to a default being recorded without people even knowing.
The listing of credit default is still very much a manual process and relies on a credit provider following the necessary legal steps prior to recording a default, as you will appreciate this process is not always followed however a default is often recorded regardless, often without the client even knowing.
The good news is in many cases defaults can be removed from a credit file given it can be shown the correct process was not followed, mistakes are common and with the right approach many defaults can be removed from a credit file like they never existed, this process is called credit repair and companies like Clean Credit Pty Ltd help people restore their credit files every day.