Credit cards/defaults/loans... help needed

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Hello

I need help trying to decide what is best to...

I have 3 credit cards to which are defaulted and have been since mid 2006.
I also have a loan to which i am paying a 24.4% APR on.
I have 5 years of the loan still left.

I have come into some money, but i can only pay off the credit cards OR the loan.

So... am i better to pay off the high interest rate or get the defaults on my credit cards removed?

I want to apply for a mortgage in the next year and im worried the defaults are killing my credit history. Due to the defaults im VERY POOR on my credit history.

Open to thoughts and suggestions

Many thanks

Loupieee

Comments

  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
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    The defaults will remain on your credit file for 6 years from the date you defaulted, whether you clear the balances or not. However, it will look better if they're marked as 'balance satisfied'.
  • loupieee_2
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    Thanks Yorkshireboy.

    Do you know how much better it would look? i/e will it take my credit history out of VERY POOR? As these defaults are the only thing that is wrong with my credit history.
  • YorkshireBoy
    YorkshireBoy Posts: 31,541 Forumite
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    You need to forget the "VERY POOR" indicator from Experian/Equifax etc, because it'll be up to the mortgage lenders to decide how bad the defaults are...to them.

    However, I'm no expert but I think you can forget mainstream mortgage rates for a good while yet...even if you settle the CC accounts (which I think is the best thing to do).
  • anotherpaul_2
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    The best option would probably be to speak to a good mortgage advisor before you do anything. They should be able to advise you, since they'll have dealt with the situation before.

    Remember that you might be able to negotiate a lower settlement figure, but DON'T start negotiating with creditors before you're sure you want to pay them off. I think it resets the time they have to recover the debt if you communicate with them.
  • loupieee_2
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    Thank you all for your input. Still very confused on what to do.
    I just think getting the cc's paid off is important as it's a default, but am bitter about paying the high interest rate.
    Guess that's the price I pay for being very careless with my spending!
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    why are you paying the loan but not the CCs?
  • loupieee_2
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    I am.. i'm paying X amount every month on the loan and X amount on the cc's. I just have an option to either pay off the entire loan or all the defaulted cc's.
    What i don't have is enough money to pay them both.

    Loan is very high interest rate... whereas my cc are all defaulted, which has seriously messed up my credit history
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    you may want to consider the following.

    Accept the fact that your credit record will be trashed for 6 years from the date of default...
    if you pay in full then the default will be marked 'satisfied' which may be of some small help.


    However you could contact each CC card and say your father/uncle or whatever has offered to help clear the debts but there is insufficient to go round and offer say 40% as a full and final settlement.
    They may or may not accept or they may make a counteroffer.
    If they accept then they will probably only mark your credit record as partially satisfied.
    If this was successful then any spare money could be use to pay the loan down a bit and give you breathing space.
    read up about this here and there is a sample letter.

    http://www.nationaldebtline.co.uk/england_wales/factsheet.php?page=24_full_and_final_settlement_offers

    if you go down this line then you must get an unambiguous letter before parting with the money. Do no rely on anything said on the phone.
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