Defaults while on reduced payments

Doubtful_Guest

I just got a free Experian credit report just to check that everything was as it should be. I was really shocked to see that I was noted as 'defaulted' on a credit card debt for months and months.

I got into a bit of a mess back in 2009 and missed some payments on my credit card which had a balance of about £1500. It got passed to a collection agency. I got in touch with them and explained by situation (ie. that my income had reduced and we were just on benefits so I just couldn't afford repayments atm). I think I might have had to provide a SOA but I can't remember for sure. Anyway, they agreed to reduced my repayments to £15 per month and to freeze interest. This seemed like a good solution and so I've been making my payment every month by direct debit for the last 18 months.

So I was pretty shocked when the credit report seemed to show that I was still in default when I'd been paying the agreed repayments every month. I contacted the collection agency and apparently this is what happens if you go on reduced payments. I'm really upset because I'm worried this will mean our credit rating is ruined and we'll never be able to get a mortgage in the future. If I had known this would happen, I would have asked to borrow the money from a family member and paid them back instead.

Is there anything we can do about this ?

Superbiatch

I'm afraid there is little you can do, after 2 months of missed (or reduced) payments most creditors will default you. A notice is sent to you informing they can do this - do you not remember receiving that? A default lasts 6 years form date of issue.

A default isn't necessary the end of the world, the older it gets and the more up to date you are with payments will go in your favour, but you will be hard pushed to find a mortgage with the high street lenders.

Sorry its not good news, but I wouldn't give up - find yourself a good mortgage broker and you never know you could be lucky with such a recent default.

Triggles

Someone else will have more definite information, but I believe a default only stays on your credit report for about 6 years. So in 6 years, provided you keep the rest of your credit report clean, you should be fine for mortgage purposes I would think.

Doubtful_Guest

So my credit report would be exactly the same whether or not I'd been making the reduced payments ? It would have been listed as 'defaulted' anyway, paying the reduced payments hasn't made any difference. So, in that case, what was the point of making the reduced payments at all ? Surely I would have been better using that £15 a month to pay off our overdraft in that case ?

Is there anyway to remove these defaults if we manage to pay it off in full, on the basis that I've been making payments all along ? If so, are you supposed to contact the original lender or the debt collection agency ?

backinbusiness

I'm afraid if they are legally applied (and it sounds like they were in this case) they will go nowhere for the full 6 years.

So easy to get into trouble and default - such a long time to recover from it!

Sympathy though.

BiB

fermi

Doubtful_Guest wrote: »

So my credit report would be exactly the same whether or not I'd been making the reduced payments ? It would have been listed as 'defaulted' anyway, paying the reduced payments hasn't made any difference. So, in that case, what was the point of making the reduced payments at all ?

You will be reducing the reported outstanding balance, so that is good.

If you stop paying completely, then it makes it a bit more likely that the creditor/DCA may take court action against you.

A County Court Judgement would be a bigger and blacker mark than just the default, and in itself would stay on the record for 6 years. If you have property with equity then the creditor might also think about trying to secure the judgement debt via a charging order.

Doubtful_Guest

Thank you all for replying.

I just feel upset because I was trying hard to sort our debt out after the initial collapse of our finances. I thought I was being responsible and paying as much as we could afford so I didn't realise it would still be marked as if we hadn't paid at all.

One last quick question. I think the default was registered back in summer 2009, we've been paying reduced payments to the collection agency since soon after that. Do they calculate the 6 years til it's wiped off from the date the default was first registered i.e. Summer 2009, in which case our credit report should be ok by Summer 2015 or from the date the debt is cleared i.e. hopefully later this year, in which case our credit report will be ok by late 2017 ?

fermi

The 6 years runs from the initial date the default is filed on your report.

So the default and all details of the account will be removed from your credit report by Summer 2015.