Debts you owe show up on your credit report, and defaulted debts continue to stick to them for up to six years, and then they fade away. Now you do not have a defaulted credit on your file, so you do not need to pay it off. This is what many people believe.
If you also think so, you are living under the impression. It is not the case that you can stop paying off your default because they have disappeared from your credit file. However, a couple of scenarios allow you to do that.
Defaults vanish from your credit report after six years
First, you need to know what debts appear on your credit report. You may think your credit file will have a record of your debts until you pay them off. Defaulted debts are yet to be repaid, so they will likely linger even for over six years, but this is in no way true.
All private lenders, including banks and financial institutions, report data to the credit bureau. A credit file of each borrower is maintained to know how they tackle their debt. This piece of information is then used to decide on future lending.
Since lenders are generally interested in knowing about recent defaults, The Central Credit Register does not intend to keep the record older than six years. They keep deleting their defaulted accounts older than six years.
If you pay a defaulted debt typically and manage to pay it off, leaving no balance at the end, it will get off your report after six years. However, if you have yet to pay to settle the account, it will die out after six years, but it still does exist legally.
What debts should you pay that is on your credit report?
It is crucial to note that now lenders do not have access to The Irish Credit Bureau is no longer available for credit referencing. Lenders cannot get your credit report from it as they have already deleted the data. As a result, they are just relying on the Central Credit Register.
It just holds information about your loans worth €500 and over. It means if you have taken out fast loans in Ireland worth €300, you will not find its record. Since there is no record, you can easily escape the payment after a default.
However, technically it is easy to pay back such a small amount of money. Borrowers usually need help to keep up with payments of a more significant debt. What if you make a default on them? Can you escape payments?
What if the default is over six-years-old?
Because the default is older than six years, you will see them removed from your credit file. If you have not made a payment toward the defaulted debt within six years, it will become unenforceable.
However, it does not mean that a lender does not reserve the right to take any action against you within this period. In fact, you would have already been familiar with the procedure of chasing defaulters by sending a barrage of notices, emails, messages and making phone calls. Then your account is passed to the debt collection agencies, which work on a debt management plan.
If you still show insensitivity, you can be taken to court. If your lender has taken court action against you within this period, you are obliged to pay off the debt. It cannot be written off even if it is older than six years.
You cannot be taken to court if you have made regular monthly payments. You are safe even if you are just making minimum payments to settle your debt. A lender can drag you to court only when you make a default in between and the period of six years is not over yet.
How is the six-year period calculated?
Most people think that the period of six years starts from the date of origination of a loan, but unfortunately, it is not true. You know that a lender has six years to take court action against you, and once this period is over, the debt is statute-barred.
If you pay the debt, the clock is reset back to start at six years again. Even the tiniest payment could start the clock back, which means the stage of statute barred will never come.
On the other hand, no lender will easily sue you. They must have a good reason to do so. If they do so, they will have to invest their time, energy and money to carry it out, which could cost double the amount you actually owe to pay off. Further, it depends on the type of debt and how it is regulated.
For instance, if you have a defaulted overdraft, c can execute no action against you unless you are sent a notice. The problem is that you may need to remember when sent the default notice to you and if you sent it. Further, creditors delay sending the default notice, so the debt does not become statute-barred.
An essential tip
Though your debt can become a statute barred if it is older than six years and you have yet to acknowledge the debt in writing, and a lender has not taken action against you, you should not just let it go as you are struggling to pay it off.
A period of six years is a manageable size. Even though a lender will not take court action against you, they will not stay calm. Sil will chase you for making payments, and the default appearing on your credit report will ding your credit score.
If you come across an emergency in the interim, you will likely be turned down, and if you are signed off on, you will end up paying a high-interest rate.
