Which is worst for credit score: 1 big default, or 3 small defaults?

Cody

Dear Forum;

I am in a pickle with large CC debts and debt from a failed company, transferred to me after liquidation (see my other posts).

This thread relates to my intention to try and keep credit score fixable within a year or two, if I need to default or do a lump sum deal with creditors.

I do not understand how defaults affect the credit file. Is the size of the default listed?, or not? Would 3 defaults of £4k each on 3 seperate credit cards, have the same affect as 1 default of £12k on one card? (When I mention default, I am referring to a full and final settlement.).

Thankyou in advance for enlightening me?

Cody

Tixy

Hi

Yes the size of the default is recorded.
If you default on the terms of agreement and have a default recorded on your credit file then there is no way that your credit file will be fixable within a year as the defaults will stay on file for 6years even if settled.
I don't think anyone could advise which would affect your 'credit score' most, but then most people on here think a credit score generated by the credit reference agencies is pretty meaningless, certainly with 1 or more defaults on file your file will look poor to any future potential lender.

Bit confused when you say you mean F&F by default - credit card companies are very unlikely to accept reduced full & final settlements unless you have already have a default recorded on your file.
In fact they rarely accept reduced F&Fs for quite some time after a person has defaulted and either has started a reduced payment arrangment or whatever. There is no guarantee they will ever accept F&Fs, its quite possible they would sell the debt on first (not to mention possibly take you to court first).

You say these were company debts? were they all in the name of the limited company? If they were then it is unlikely they will appear on your credit file at all, as even if there were personal guarantees in place it wouldn't give them permission to report the debts on your personal credit file. Though obviously if they obtained a CCJ against you personally then that would show up on your file.

Cody

Hi;

Okay, this makes sense. I am beginning to understand credit scores are not an exact science, and lenders may use them in conjunction with other factors when assessing.

I have also been presuming that the PG on my old-companies overdraft would impact on my credit file, since I am having to do a deal with the recovery company (a 30% lump sum hopefully, currently in progress).

My motivation to maintain a good credit score is so that one day, I can buy a house with my partner (she has a good / excellent credit score).

I believe that mortgage companies will not turn down an application based on credit score alone, but will like to understand factors that contributed to a poor score, and the financial situation at the time of application (i.e. now having a secure job), and also that one member of the couple applying have a good score / history?

Is my belief generally correct? I am hoping that mortgage companies look in more depth at credit history than credit card companies too.

Cody

RobertoMoir

Cody wrote: »

Hi;

Okay, this makes sense. I am beginning to understand credit scores are not an exact science, and lenders may use them in conjunction with other factors when assessing.

Then, respectfully, you don't understand credit scores. I mean you've gone so far and that's good, but what you need to understand is the each lender you apply to will have their own scoring system based on their own criteria... they're not going to say "Oh crazy joe's place of random credit scores gave this guy 996 out of 1000, better send send the guy the money then". They will use their own "scoring" scheme based on, yes, your previous credit history and also what they think of their chances of making a good profit from you.

I have also been presuming that the PG on my old-companies overdraft would impact on my credit file, since I am having to do a deal with the recovery company (a 30% lump sum hopefully, currently in progress).

So as Tixy asked, was this a limited company or not? That's fairly fundamental to understanding your current credit position, to be honest.

My motivation to maintain a good credit score is so that one day, I can buy a house with my partner (she has a good / excellent credit score).

I believe that mortgage companies will not turn down an application based on credit score alone, but will like to understand factors that contributed to a poor score, and the financial situation at the time of application (i.e. now having a secure job), and also that one member of the couple applying have a good score / history?

Is my belief generally correct? I am hoping that mortgage companies look in more depth at credit history than credit card companies too.

Cody

Some might, some might not, all lenders have their own criteria. All the credit score means from the likes of Experian is a summary of how your credit record looks based on the criteria they use themselves... which is nice but they're not the people lending you money. A good score doesn't mean you'll get credit of any kind and a bad score doesn't mean you won't get credit, or get credit at a good price.

The credit search firm's score may might be indicative of how a lender might view, and may also be a good way of highlighting obvious problems if you keep an eye on it, nothing more or nothing less...

Cody

Hi, Thanks;

The company was limited. I am now being chased by a debt recovery agency for the PG on the overdraft. I had preseumed that this debt is now liable by me and will affect my credit file? They had told me they had informed credit agencies?

Cody

Tixy

I would have thought it probably won't affect your credit file - but that would just be an assumption on my behalf without seeing exactly the credit agreements and PGs that were signed.

Only way to check is to get a copy of your credit file from each of the 3 agencies. If any of the limited company debts appears on any of them then you'll know they'll definitely affect your ability to get credit for the next few years. If they don't appear then they won't, in general, affect your ability to get credit (I say in general because obviously the specific banks the money is owed to will still be aware of the debts and any repayment problems).