Turning "bad" debt to "good" debt?

Maccas08

Hi all. Hoping someone could help...

Currently I'm paying off old loans through a (free) Debt Management Company after getting into trouble when I was younger.

These debts are due to be paid off in around a years time, and the interest is currently frozen on them. However, as they've incurred missed payments in the past, I'd like to get the balance to a status of "settled" ASAP, as I plan to apply for a mortgage in 2 years.

Is there a way to settle the debts early and change it to "good" debt to help my credit score improve earlier?

My only idea so far is to ask the missus to pay off the debt with a 0% credit card which I'll then pay off within the year. However, I'm not sure settling a debt would be classed as a purchase?

Any ideas??

Tixy

Have you actually looked at your credit files?

It would be usual that these debts will show as defaulted debts.
If they do then the defaults and account history will stay on your file for 6years from the default date.
If they are paid in full before the 6 year period is finished then they will show as satisfied defaults.

Assuming they do show as defaults then you need to check how old the default date is and whether they will still show at all by the time you are planning to apply for a mortgage.

Maccas08

Yes, I've looked at the file. One (of two) is shown as default, and one is shown as late payments.

I know that one will have disappeared by the time I apply for the mortgage, and one will still be on. That's the reason for wanting to pay it off as soon as I can, to give me a chance to rebuild my credit in the next two years (i.e. with a daily use credit card paid off in full - Yes I do listen to the man himself!)

Tixy

Is your creditor still reporting late payments? or were there a few in the past but it now shows as satisfactory?

If you carry on as you are how long until you expect to finish the DMP? sorry I see you have already said that!

Have you tried getting a subprime card at all even with the debts still showing as outstanding?
Any other active accounts at all on your file?

If its paid off in a year then you still have a good year to build up a reasonable credit history, which should be sufficient for a mortgage.

Is the debt with a debt collector? if it is they may accept payment by credit card from your OH. You'd need to check with your card provider whether it would be treated as a purchase. Another option might be if she could get a 0% credit card that allows balance transfers to her current account, which she could then use to pay off the debt.

Thrugelmir

Maccas08 wrote: »

I know that one will have disappeared by the time I apply for the mortgage, and one will still be on. That's the reason for wanting to pay it off as soon as I can, to give me a chance to rebuild my credit in the next two years (i.e. with a daily use credit card paid off in full - Yes I do listen to the man himself!)

You may well struggle with mainstream lenders to obtain a mortgage within such a timeframe.

Maccas08

Tixy wrote: »

Is your creditor still reporting late payments? or were there a few in the past but it now shows as satisfactory?

If you carry on as you are how long until you expect to finish the DMP? sorry I see you have already said that!

Have you tried getting a subprime card at all even with the debts still showing as outstanding?
Any other active accounts at all on your file?

If its paid off in a year then you still have a good year to build up a reasonable credit history, which should be sufficient for a mortgage.

Is the debt with a debt collector? if it is they may accept payment by credit card from your OH. You'd need to check with your card provider whether it would be treated as a purchase. Another option might be if she could get a 0% credit card that allows balance transfers to her current account, which she could then use to pay off the debt.

Thanks for the advice Tixy.

They're still showing as late payments every month (maybe I should contact the lender, as technically they're not late when they've accepted an offer from the DMC?)

I was thinking along the same lines of having a year to build it up too, but thought i'd try and do it a year early as such, if I had the chance. Its not with a debt collector.

I think the route i'll go down will be the credit card money transfer - assuming the missus agrees! :):)

Looking around this site, it recommends a "super money transfer", and even recommends cards. Brilliant!