Does Cancelling a Direct Debit Affect Credit Score

Does Cancelling a Direct Debit Affect Credit Score

Direct debits are one of the most common ways to pay bills in the UK, covering everything from mobile phone contracts and broadband to loan repayments and streaming subscriptions. But what happens if you cancel a direct debit? Does it affect your credit score?

The short answer is cancelling a direct debit will not affect your credit score by itself, but what you cancel and how you manage the payment afterwards can have a significant impact. In this article, we’ll explain how direct debits interact with your credit report, when cancelling one can cause problems, and how to handle payments correctly to protect your credit file.

What Is a Direct Debit

A direct debit is an instruction from you to your bank or building society authorising a company to collect money from your account on a regular basis. It’s used to pay for:

• Utility bills

• Insurance policies

• Credit card repayments

• Loan repayments

• Mobile phone and broadband contracts

• Subscriptions and memberships

The company you're paying can change the amount and payment date, as long as they give you notice in advance. It’s a simple and reliable way to avoid missing payments.

Does Cancelling a Direct Debit Affect Credit Score

Cancelling a direct debit does not directly affect your credit score. Credit reference agencies such as Experian, Equifax and TransUnion do not track direct debit activity. They do not record whether a direct debit exists, is active, or has been cancelled.

However, the consequences of cancelling a direct debit can absolutely affect your credit score, depending on what the payment was for.

If you cancel a direct debit that covers a credit agreement, such as a:

• Loan

• Credit card minimum payment

• Car finance

• Mobile phone contract

• Store card

And you don’t arrange an alternative method of payment, then missing a payment will result in a negative mark on your credit file.

This could include:

• Late payment notices

• Defaults

• Account arrears

• Even a County Court Judgment (CCJ) if the debt goes unpaid

Each of these outcomes can seriously damage your credit score, and the record can stay on your file for six years.

When Cancelling a Direct Debit Is Safe

You can safely cancel a direct debit without affecting your credit score in certain situations, such as:

• You’ve closed a subscription service like Netflix or a gym membership

• You’ve fully repaid a loan or credit agreement

• You’ve switched providers and set up a new direct debit elsewhere

• You’ve arranged to pay by another method (such as standing order or manual payment) and your provider has agreed

It’s always best to confirm with the company before cancelling the direct debit, to make sure there are no outstanding payments or ongoing obligations.

Real-World Example

Sophie cancelled her direct debit to her broadband provider because she was switching to a new service. However, her final bill hadn’t been paid, and she missed a payment. The provider reported the missed payment to Experian, and her credit score dropped by 45 points.

By contrast, Marcus cancelled a direct debit for a gym membership after confirming the cancellation with the provider. There was no money owed, and the cancellation had no impact on his credit report.

How to Cancel a Direct Debit Safely

1. Check if money is still owed
   Make sure there are no upcoming payments or final bills due before cancelling.

2. Contact the company first
   Confirm with the service provider that it’s okay to cancel, and ask for confirmation in writing.

3. Set up an alternative payment method if needed
   If it’s a credit account or loan, switch to another form of payment to avoid missing your due date.

4. Use your bank or app to cancel
   Direct debits can be cancelled online, via mobile banking, over the phone, or in a branch.

5. Monitor your account
   Keep an eye on future bills and credit reports to ensure everything is settled and reported correctly.

What If You Cancelled a Direct Debit by Mistake

If you cancelled a direct debit in error, and missed a payment as a result:

• Contact the company immediately and explain the mistake

• Pay any overdue balance as soon as possible

• Ask for a goodwill adjustment if it’s your first missed payment and you resolve it quickly

• Check your credit report to see if a missed payment was reported

Acting quickly can help prevent or minimise any damage to your credit score.

Final Thought

Cancelling a direct debit does not affect your credit score directly, but it can lead to serious issues if it results in missed payments on a credit account. Always check with the provider before cancelling a direct debit, especially if it relates to a loan, credit card or mobile phone contract.

Being careful with direct debits is an easy way to stay on top of your finances and protect your credit score. If you're unsure, take a moment to double-check before making changes that could have lasting consequences.