DMP Partial Settlement vs Full Settlment - Long Term Effects?

DBB_22

Afternoon All,

I’ve been here before with variations on the same question. But now it’s distilled down to one question – which I’ll leave to the end.

I’m 6 years into a DMP – started at £39K now have a balance of around £5k. Breakdown as follows:-


HSBC Card (Default Expired Nov ’12) - £780
Santander (Default Expired Jan ‘13) - £1590
MBNA/Idem - £1350
HSBC/Cabot (Default Expires Jun ’13) - £1200

I’ve got £4,000 to pay the lot off. I could probably do it for half that.

However, my dilemma is this – how badly will a ‘partial settlement’ marker affect my credit rating as opposed to a ‘satisfied’ marker?

I’d love to save a few grand but not at the cost of hampering my credit rating if the partial settlement will be viewed dimly by lenders a year or so from now when I will be looking to get a mortgage.

Given that two of my accounts have dropped off my file HSBC Card & Santander) would a partial or full settlement marker have any affect on these particular accounts at all?

Is there an argument for fully settling some accounts and part settling others?

Sigh, why are there no 'easy' answers?!

acheekymunky

I'd love to hear some advice on this too so giving it a bump x

DBB_22

Hello acheekymunky, here's the response I got to this question in another post/thread.

Hello,

When it comes to credit files, you're completely right, there never seems to be an easy answer.

In short, partially settling a debt will put a flag on your credit report. This flag might be ignored in the credit scoring process, depending on the lender. Otherwise it may lead to them doing a manual review of your application (using a human rather than a computer).

Whether settling a debt is proof of not handling credit well is a subjective decision, so it's hard to say if potential lenders would
see it as a negative.

You can read more about this here: http://www.experian.co.uk/consumer/q...kjames261.html.

Whether to pay the debt back in full or negotiate a settlement is a personal choice. If your creditor is willing to offer a substantial discount then it may be worth risking a slightly worse credit rating but that depends on how important a good rating is to you and the size of the discount.

As always, only make settlements after you've received written confirmation that the rest of the debt will be written off.

Kind regards

James

Given that of my defaults will have expired by June and the other is a 'charged off' credit card. I'm going to settle for as little as possible. By the time I come to the mortgage hunting table this time next year I'll have a sizeable deposit and no debt so I figure I'll be ok...might as well settle for as little as possible now and put the remainder of the £4k I have to settle towards the deposit.