Does the level of default make any difference?

NPowerUser

Long standing default on an old credit card, with payments of around £10 a month with interest frozen on a debt close to £3500

Whether I pay £10 a month or £200 a month, other than clearing the debt more quickly, will it benefit my credit rating if I pay it off more quickly?

Should matters improve in the future so my credit score increases sufficiently, if the amount I can afford to pay off each month increases dramatically, will creditors look at me more favourably?

I am looking to pay the debt in full over the next 12 months as I now have spare income to do this?

Thank you, any comments or advice appreciated.

Tixy

Does the level of default make any difference?

The size of the original default can make a difference.
Some potential lenders are more forgiving of a small default of say £60 for a phone bill than a large default of £5000 on a bank loan.

Whether I pay £10 a month or £200 a month, other than clearing the debt more quickly, will it benefit my credit rating if I pay it off more quickly?

Once a defaulted debt is fully paid off then it is unlikely to matter much whether you paid it off in 2years or 3 years since the original default.

But the sooner it is paid off the sooner you can start on building up a a positive credit history.

lvm

A satisfied default looks better than an unsatisfied one.

An outstanding defaulted account of £500 looks better than one of £3500.

The amount you pay won't have an affect on your credit file though.

How "long outstanding" is the debt? If it falls aff your record within the next year you might want to ask yourself if it's worth paying so much extra towards it given that it's interest free.

What creditors do you want to look at you more favourably? If something like mortgage lenders, a default can be a huge barrier whether paid or not.

NPowerUser

In various levels of default since April 2010, starting off as a late payment before turning red as a permanent default since May 2011.

Very small token payments in the region of £2 until I increased it to £10 a month recently.

Circumstances have now improved so I should be able to pay it down over the next 12 months.

So regardless of whether I pay it back in 12 months or 60 months it wont make much difference on my credit file?

How soon after repaying in full will it take for my credit score to improve?

Tixy

By the level of default we mean the value of the default reported on your credit file, so the value when you say it became a 'permanent' default.

As soon as it is paid off then your chances of being accepted for some credit products will improve (e.g. some credit card providers will consider applications from people with satisfied defaults but not unsatisfied ones).

Your chances of getting mainstream credit/the best deals around will remain low until the account drops off your file altogether (which is 6years after the default date shown on file).

NPowerUser

I do have a Vanquis Credit Card which I have had now for 15 months, paid off in full each month with an available balance of £1000

I will do my very best to pay it off in full sooner if possible.

Its a shame that paying it off quicker doesn't help in the short term.

Thrugelmir

NPowerUser wrote: »

So regardless of whether I pay it back in 12 months or 60 months it wont make much difference on my credit file?

In the context of obtaining a mortgage for example , a huge difference. As you'll need a clear record of at least 3 years.