The three major credit reference agencies, Experian, Equifax and Callcredit, keep records of your debt and payment history. There is no such thing as a credit score, rather there are the credit reference agencies sell information from their databases so lenders can assess whether they wish to lend you money, either as cash, credit or by providing goods or services to be paid off in installments.
For as long as a debt is outstanding, it remains visible on your credit record. This is so that potential lenders can see that you still owe money and factor that into their lending decision concerning you. There is no way to remove an unpaid debt from your credit record, unless you can successfully dispute the debt with the lender.
If you miss a payment, for example to your broadband provider or loan company, it is recorded on your credit score for three years. Even if you pay it off within a week, the default is noted. This doesn’t mean you can never get credit again however, although it is likely to affect your overall credit worthiness in the eyes of potential future lenders. For example, you may be offered a lower credit limit on a credit card than you’d get if you hadn’t missed the payment.
Settled unsecured debt
Once you’ve cleared an unsecured credit debt, such as a credit card, store card or mobile phone bill, it remains on your credit record for six years. Anybody looking at your credit file in that time will be able to see that in the past had an unpaid debt against your name, but this doesn’t necessarily mean they’ll refuse to lend to you. Each lender uses credit files to judge risk based on their own lending criteria.
Settled mortgage debt
Mortgage arrears can remain on your credit record for 12 years in England and Wales and up to 20 years in Scotland. Since mortgage default is commonly associated with insolvency and bankruptcy, it is considered by the credit industry as a serious black mark against your name.
Your credit score
The term “credit score” and “credit rating” are slightly misleading. There is no fixed score attached to any person’s name, simply a list of their current debts and notes of any missed payments, outstanding debts and bankruptcies or insolvencies. Each lender uses this information to come to their own rating based on their lending terms and criteria. One bank may refuse you a mortgage while the bank next door may offer you one. You can improve your credit score by cancelling unused credit cards, paying off outstanding debt and by writing to any credit references that hold incorrect or inaccurate information about you.