Reduced Settlement of Credit Card – affect credit score?

STSAVER

Sorry, also posted this on the "Credit Cards" section - not quite sure where it should be since its about Credit Cards, but also about me trying to become Debt Free!

Wondering if anyone could offer some advice so I can decide whether it is worth investigating whether Credit Card companies would accept an early lump sum settlement.

Quite a few years ago now got myself into a credit mess, building up a crazy amount of debt across 6 credit cards in addition to a loan that I also had. The loan has subsequently been settled in full, therefore I have been working towards repaying the credit cards as much as possible, and I came to an agreement with MBNA for two of the cards to implement a reduced payment plan (which shows on my credit file now as an “Arrangement to Pay”)

Barclaycard have recently contact me to inform me that my Interest Rate will be increased significantly, unless I contact them to refuse the increase and close the account (continue to repay at the current rates).

I have kept all payments up to date and on time since mid 2009 now, and 2 of the cards have no history of missed or late payments against them.

I may be in a position in the coming months to make a significant lump sum payment towards these debts. I am therefore wondering whether I should contact all of the companies concerned and enquire as to whether they would accept a reduced amount to settle and close the account.

What I am wondering though is how would this be reflected on my credit history? Would it be shown as a default or simply that I have settled the balance with them and the accounts closed?

lornz23

Hello!

From what i have read on here unless you have defaulted on the cards then it is unlikely that the companies will take a reduced lump sum to clear the account as you can still make the min payments. If you however default it will affect your credit rating and make it difficult to get credit. It will show on your account as default (well it does on mine anyway) and then will say closed when complete.

Hope this helps but I am sure there will be more along that can help!

Good luck!

STSAVER

the two cards with MBNA, that are now on arranged payment plan, do not show as a Default as such or that any amount has been defaulted on, however when agreeing to the payment plan they did tell me that would consider reduced settlement should I ever be in a position to do so.

No harm in investigating with them, which I will do, and requesting for everything to be confirmed in writing, but was hoping for a bit of info from people first on whether its likely and what would usually be recorded on my credit file.

I have found a few articles giving advise on how to do it, and what to request be shown on the credit file etc.

climbgirl

A reduced settlement offer will definitely impact your credit rating - it will show as settled but not in full - you're basically not paying back all the money you borrowed so it will impact on your credit record

Banks are unlikely to accept a reduced settlement if you haven't defaulted - it's generally a last resort for them, a way of getting some money back when they've realised they're probably not going to get it all back.

STSAVER

well, Barclaycard have agreed not to increase the Interest Rate following a phone call which is a start.

Next step to see if MBNA would accept a settlement amount.