Definitive answer: is a settlement better than a default?

ddvilanova

I keep reading mixed answers on this across the internet, but ill try here in the hope of getting a definitive answer.

I have two old debts:

1. Vanquis £3500 (i maxed out my limit at £500 when i was having financial trouble and they just kept putting up the limit every month - obviously they saw i was having trouble and knew i would use it. My fault ultimately though but cant help feeling they were a little responsible)

2. Provident loan, outstanding amount £1400


Both debts are with collectors now, and i have been given settlement figures: Vanquis: £1700 and Provident: £700


I have payed provident off so that will be marked as settled i believe next month. Vanquis settlement figure is £1700

I have been reading that a settlement is just as bad as a default as it shows future lenders that you dont pay your debts off in full. Sounds really flippant but should i not bother paying the Vanquis debt if this is the case.

I want to pay my debts, dont get me wrong, but if it doesnt improve my financial status why should i, particularly given the profiteering and preying on people in financial trouble that Vanquis are doing?

matttye

You are a little bit confused I think. You still have a default even if the debt is marked as satisfied (it will be marked as 'satisfied,' not 'settled.')

If you pay the debt in full it will show as 'satisfied' and you will still have a default, but if you pay the debt at a reduced figure it will show as 'partially satisfied' and you will still have a default.

Defaults stay on your credit file for six years, and the presence of a default is going to have an effect on your ability to get credit until it falls off. Satisfied/partially satisfied won't matter too much because you'll have defaults either way.

How old are the defaults now? If you don't pay, you run the risk of being taken to court and given a CCJ - which will stay on your credit file six years from the date it's issued and put you in an even worse position.

ddvilanova

Well the Vanquis debt defaulted in February after 6 non payments. So it is quite new unfortunately.

I understand that the default will stay there for 6 years and that this is detrimental either way. What i am unsure about is, how much benefit will my credit rating/history gain by settling that debt at a reduced rate and having it marked as satisfied.

matttye

ddvilanova wrote: »

Well the Vanquis debt defaulted in February after 6 non payments. So it is quite new unfortunately.

I understand that the default will stay there for 6 years and that this is detrimental either way. What i am unsure about is, how much benefit will my credit rating/history gain by settling that debt at a reduced rate and having it marked as satisfied.

There are conflicting opinions on this but I don't think it makes a big difference either way.

I have two fully satisfied defaults over four years old and I can only get bad credit cards even now.

ddvilanova

So there may be no point in paying off the vanquis debt (with regards to my credit rating) ?

matttye

ddvilanova wrote: »

So there may be no point in paying off the vanquis debt (with regards to my credit rating) ?

If they take you to court then the only way to prevent a CCJ would be to pay in full, so if you do decide not to pay, you should make sure you're in a position to pay it in full if it comes to that.

In the meantime, a satisfied debt will look better than one that's still in default. But like I say, defaults always have a negative effect no matter what their state (satisfied, partially satisfied or unpaid).

I'm speaking strictly in terms of your credit rating. Clearly there's a moral obligation to pay what you owe.

dmb_2

matttye wrote: »

There are conflicting opinions on this but I don't think it makes a big difference either way.

I have two fully satisfied defaults over four years old and I can only get bad credit cards even now.

Presumably in anoher two years when the defaults drop off you will be able to get better credit?

matttye

dmb wrote: »

Presumably in anoher two years when the defaults drop off you will be able to get better credit?

Yeah should be able to. I'll have some arrangement to pay markers that will remain on there for four months after my defaults drop off, but once they've gone I'll have a clean report