I’d been carrying the word default around for three years without knowing what it meant

This is a composite of conversations we have most weeks, written up as one story. Details have been changed. It is a personal account, not mortgage or tax advice.

The short version, so you don’t have to give up your Sunday like I did. A default is what a lender registers when it decides an account has gone bad, usually after three to six months of missed payments, and it stays on your credit file for six years from the date it was registered. Not from the date you clear it. Paying it off marks it as satisfied, which lenders would much rather see than an unpaid one, but it does not remove the record or restart the clock. A default is more serious than a missed payment and less serious than a CCJ, an IVA or bankruptcy. And if you’re self employed, lenders assess you on the profit shown in your accounts and tax calculations, not your turnover and not what you draw out.

That last sentence is the one that ruined my afternoon.

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My wife asked me what a default actually is.

Nineteen years self employed, two of them on my file, and I couldn’t tell her.

I knew what it felt like. I didn’t know what it was.

So I gave up the Sunday to it, and I found out more in six hours than I had in three years of assuming.

How long does a default stay on your credit file?

Six years.

That’s the number, and most people know it.

Here’s the bit I didn’t: the six years runs from the date the default was registered, not from the date you pay it off.

Mine went on in 2023. They come off in 2029, and there is nothing I can do about that.

Paying it off does not restart anything

I’d been quietly proud of clearing those two accounts in 2024. Felt like I’d fixed it.

I hadn’t fixed it. I’d settled it, which is a different thing.

What paying it off does is change the status to satisfied. That matters. A satisfied default tells a lender the debt got dealt with, and an unsatisfied one tells them it’s still hanging there unresolved. Some lenders will only look at defaults that have been satisfied at all.

So it was worth doing. It just wasn’t the reset button I thought I’d pressed.

What a default actually is

Turns out it’s not a punishment somebody chose to give me. It’s an administrative event.

When you stop paying a credit agreement, the lender chases you, and after a period of arrears, normally somewhere between three and six months, they decide the relationship has broken down and they close the account as defaulted. That decision gets reported to the credit reference agencies.

Which means the exact date on my file was decided by an admin process at a credit card company in 2023, while I was on a roof somewhere trying to earn the money back.

I’d never seen the actual dates until that Sunday. I’d never looked at my own credit file. Nineteen years of running a business and I’d never once read the document that other people were using to judge me.

Where a default sits on the scale

This bit cheered me up, briefly.

There’s a hierarchy, and each step down is a bigger deal to a lender than the one above:

Two satisfied defaults from 2023 is not the bottom of that list. It’s the middle, ageing, and already dealt with.

I sat there thinking: so why did four minutes on the phone make it sound like the end of the world?

Then I found the bit about self employed income

And this is where the Sunday stopped being encouraging.

I’d assumed my defaults were my problem.

They’re not the main one.

Lenders don’t assess a self employed person on turnover, and they don’t assess you on what you take out of the business. For a sole trader like me it’s net profit, the figure left after costs, evidenced by your accounts and your SA302s. An SA302 is the tax calculation HMRC produces from your self assessment return, and it’s the number most lenders work from.

Most want two years of it. Some will look at one year, which I didn’t know either.

So I got the folder out and I looked at my own SA302s properly for the first time in my life.

And they’re low.

Not wrong. Not dodgy. Low.

My accountant has been doing exactly what I asked him to

Because for years, my accountant, who is good at his job and has saved me a lot of money, has quite legally kept my declared profit as far down as it will go. Every allowable expense, every bit of kit through the books, all of it correct and all of it above board.

Which is brilliant for a tax bill.

And it turns out the number he’s been carefully minimising is the exact same number a lender uses to decide what I can borrow.

Nobody had ever mentioned that those two things pull against each other.

Not my accountant, who was doing precisely what I hired him to do. Not the bank. Certainly not the bloke on the phone with the form.

I’ve spent six years being efficient in a way that made me look poor to the only people I now need to look solvent to.

And my clever plan was going to make it worse

Because my answer to being declined had been: right, save harder, get a bigger deposit, go back in six months.

And the way I was going to save harder was by taking less out of the business.

Which does nothing to the figure they actually look at, and pinches us for no reason in the meantime.

I’d have done a whole year of that and turned up in front of the same form with the same problem.

So where does that leave me

Better informed and more annoyed.

I know my defaults come off in 2029 and I know they’re satisfied and mid-table rather than fatal.

I know the actual obstacle is my own accounts, prepared properly by a professional, doing exactly the job I paid him to do.

What I don’t know is whether that’s fixable. Whether there’s a way to buy a house in Hadleigh next year, or whether I’ve spent nineteen years building a business that’s very good at feeding us and structurally incapable of getting us a mortgage.

I’m not ringing another call centre to find out. I’ve done my four minutes.

Lad on a job in Benfleet last week mentioned a local broker his sister used. Small firm, up the road, deals with this sort of thing.

The folder’s on the passenger seat of the van. Two years of accounts, both SA302s, and my credit report printed out.

It’s been there since Tuesday.

Part one: Four minutes and eleven seconds to decide about a house Part three: She said my defaults were the easy half