A warning to those trying to get debt free!!

Mbay10

Hi All,

I wanted to post this warning as I think others should know about it.

To cut a long story short I had a next catalogue which for a number of reasons I fell behind with payments and it was passed to their debt collection agency, Debt Managers Ltd.

I have been paying off this debt at a small amount of £10 per month for a number of years. Just before Christmas I received a letter from debt managers saying they either wanted to increase the monthly payment to £15, or alternatively they may be able to offer a 25% discount if I settled in full.

I had got the debt down to approx £120 so called and said I would pay in full - they offered a 25% discount and I paid up.

When I paid up I asked if they could make sure that my details where updated on my credit history (Experian etc) to show that the account was paid in full and settled.

They said they were unable to do this as the account still belonged to Next and I would need to contact them. I did this and spoke to a guy in next who was quite abrupt and said he couldn't possibly advise that the account was paid in full as it hadn't been.

He said that I was quite clearly told by debt managers ltd that what would show on my credit hisory was that the account was settled but that a note would be added to say that the account was only part paid and therefore still show in a bad light in the eyes of possible future lenders, for 6 years!

I think this is extremely misleading and an underhanded way of getting customers to pay up lump sums in the belief that they are settling their debts - when in fact they still have a poor credit history as if they had not bothered paying up at all.

I was not advised of this by anyone in Debt managers at all, and it does not appear on any of their letters. When I questioned them about it -they said they would only have mentioned it if I'd have asked about it!

I requested my account be retrieved/re-opened by debt managers and I paid the remaining 25% discount! so at least I now have a better credit history, which says account settled - paid in full.

My point is, be aware if you are offered settlement discounts as they may not be all that they seem. Always ask about how it will appear on your credit history!! You may be killing yourself to pay off your debts and be no better off for it!

drrat

didn't know this, good to know, as I have considered doing the same.

Tixy

If you are doing a reduced F&F settlement its always advisable to get a written offer from them explaining exactly what the offer is for, don't deal with them by phone.

The national debtline has a good template letter to use drrat (or anyone) for when you are doing any offers.

Whilst some lenders will agree to mark as settled in full it is more usual that a reduced settlement will be marked on your file as partially settled.

If this account already had a default on the account (and most do when you are paying F&Fs) then the partial settlement will only show on file for 6years from the date of the original default and actually probably won't make your file any worse than the default was already doing.

Mbay10

I still believe that a potential lender would differentiate between part paid and settled in full.

I'm not entirely sure what you mean by 'default' - there were no payments missed/ or late payments made on the account for a number of years.

And I still think that it is important for others to be aware that because they think they have settled an account in full - that is not always the case.

Mbay10

Additionally, I had sent in the template letter you mentioned requesting F&F settlement initially, but was refused.

They then wrote to me a couple of weeks later with the 25% discount offer.

lvm

Tixy wrote: »

If you are doing a reduced F&F settlement its always advisable to get a written offer from them explaining exactly what the offer is for, don't deal with them by phone.

The national debtline has a good template letter to use drrat (or anyone) for when you are doing any offers.

Whilst some lenders will agree to mark as settled in full it is more usual that a reduced settlement will be marked on your file as partially settled.

If this account already had a default on the account (and most do when you are paying F&Fs) then the partial settlement will only show on file for 6years from the date of the original default and actually probably won't make your file any worse than the default was already doing.

I'm so glad I came across your post Tixy! I've been searching for ages to try and find out if accounts are removed from your file 6 years after default or 6 years after settlement! So glad to hear it's the first one as there will be around a 3 year gap for me!

Tixy

Mbay10 wrote: »

I still believe that a potential lender would differentiate between part paid and settled in full.

I'm not entirely sure what you mean by 'default' - there were no payments missed/ or late payments made on the account for a number of years.

If the account has been sold to a debt collector then chances are a default notice was registered on the account. A default is not a missed payment its a set point in time when the lender decides the original agreement has irrevocably broken down. If you have a default on an account you can see it on your credit file - and it will give the original default date.

Now 6years after that default date the debt will stop appearing on your credit file entirely. For those 6years though it makes getting new credit very difficult -regardless of whatever else in on your file.

So when you come to settle an account a person needs to weigh up would they rather pay less and be happy with the partially satisifed showing for the remainder of that 6year period (knowing that their credit file already looks really bad) or would they rather pay in full and have the debt show as settled for the rest of that 6year period.

The answer depends on the person, how old the default it and whether they may need to apply for credit products in the time between the account being settled and the debt disappearing from their credit file.

Often by the time people can afford F&Fs the default may already be say 4 years old - so the maximum amount of time the partial settlement could possibly affect them for would only be 2years (in this example). As no high street banks will be likely to lend to them anyway (because of the default), people often decide they would rather pay less and be resigned to the partial settlement.

Mbay10 wrote: »

And I still think that it is important for others to be aware that because they think they have settled an account in full - that is not always the case.

I agree, even if a person agrees to having their file marked as partially settled then the important thing is to have in writing that the payment will be in full & final settlement of the debt and neither the creditor or anyone else will chase the debtor further in relation to this debt.
If they don't have this proof its not unheard of to be chased for the remainder of the balance even several years down the line.

Tixy

lvm wrote: »

I'm so glad I came across your post Tixy! I've been searching for ages to try and find out if accounts are removed from your file 6 years after default or 6 years after settlement! So glad to hear it's the first one as there will be around a 3 year gap for me!

Yep whether paid, part paid or all still outstanding after 6years the debt no longer shows on your credit file (well apparently with equifax it has been known to be 6year and a week or so!)