Default Definition

To default on a financial agreement is to fail to comply with the terms of the agreement. In personal finances, this usually means that an individual debtor has failed to make a scheduled payment. The reason for failing to make the payment is not significant. Some debt contracts may allow occasional defaults without catastrophic consequences-for example, a credit card account will typically assess a missed-payment charge but allow the account to remain open. On the other hand, even a single missed mortgage payment typically will cause foreclosure proceedings to begin. Note that defaults are always reflected on an individual’s credit history.