Can pay off debt in one payment. How will this affect my credit score?

matt_oates_11

Hi guys,

I've just graduated from university and I'm carrying some debt which is affecting my credit score. After reviewing my credit report on givemecredit.com it shows I have the following debt:

Unsecured Credit - Total £3,417

£277 - Default
£1740 - Default
£1400 - The payment has been made on time and is upto date.

Overall they say I have a credit score 479 out of 1000.

After a recent inheritance I have the money to pay all these debts off in full but i've been reading that this may have an adverse affect on my credit score?

If I pay the debt off in full and get them marked as paid in full how will this affect my credit score in the short and long term?

Thanks in advance.

floopnoodle

I don't think paying them off instantly will worsen your score, but paying them off over the next 18 months without missing or making late payments should improve it as it will give you a better payment history.

By how much I'm not sure. Me, personally, I would pay them off instantly and get them off my mind.

matt_oates_11

That's what i'm thinking. The quicker I pay the debt off (e.g in full) the quicker my credit score will repair itself. I'm guessing that once I pay the debt the status will change from default to paid in full and that should make my credit score better?

Should I:

1) Pay all debts off in full and get the status changed to settled.
2) Make monthly payments without missing any until debt is paid in full and status changed to settled?

Some expert advice would be appreciated!

Thanks

fermi

Defaulted accounts will stay defaulted, but just marked as "settled" in addition to the default.

The default is going to remain. No matter what. Settling sooner may look better to some lenders, and it won't do any harm.

matt_oates_11

What is the advantage to paying the default off then? Is there any point in paying £277 + £1740 if they will remain as a default on my credit file?

fermi

matt_oates_11 wrote: »

What is the advantage to paying the default off then? Is there any point in paying £277 + £1740 if they will remain as a default on my credit file?

If paid off, they cannot take you to court.

If they go to court and get a judgement, then that goes as an extra entry on your credit file for 6 years from the date of a judgement.

So defaults, yes, stay whatever and last 6 years. But if you don't pay then you risk court action which will screw your credit record for possibly much longer depending on when they do it.

fermi

matt_oates_11 wrote: »

What is the advantage to paying the default off then? Is there any point in paying £277 + £1740 if they will remain as a default on my credit file?

Plus an older default will have less impact over time.

I paid one on anecdotal accounts may look better sooner.

ss3n08

Would it not be better to clear the debt so you are not tempted to spend the money on other things?

matt_oates_11

Thanks for the advice guys.

I want to repay the debt and i'm thinking the best way to go is to make a payment to all my creditors in full and request in writing that they must mark the debt as settled on my credit file.

Maybe then I can get a credit repair credit card and start rebuilding my credit history.

I'm 24 and have a good income with enough money for a deposit on a house so I want to be able to get a mortgage asap.

andymc29

As with any debt. Paying it off quicker in one payment is the best option.