Low rating due to debt solutions company

bubblebath77_2

I'm posting on behalf on someone else.

A friend wants to look at buying his first home soon and went to a bank to see if he could get a mortgage. After being refused he logged on to Equifax to see what was happening.

Just over two years ago he was in quite a lot of debt and was struggling to afford payments so organised a debt management plan with a company where all his debt was being paid in one payment to them who would then pay each of the companies. This summer he paid a lump sum to close most of the accounts and next month will be his last payment and will be completely debt free.

However, when he checked his credit rating, it was WORSE than it was two years ago. He has never missed a payment and has worked really hard to get his rating higher, getting a credit card and paying it off every month etc etc. He found that since he opened this debt management plan, they have paid every account late every single month without him realising.

Is there anything he can do to prove he has never missed a single payment or even paid late and that this is actually the debt management's fault? He is obviously devastated by this after all his hard work the last couple of years. I have told him not to contact the debt management people until he has prepared himself and knows exactly what he is going to say to them rather than calling up in the heat of the moment.

Any advice will be great, thanks.

Tixy

When he entered the debt management plan was he paying less than the original contracted amounts? if so then it is usual that the creditors will file a default or arrangement to pay on the debtors credit file to reflect that he had broken the original agreements. Or occasionally some creditors may file missed payments to reflect that the debtor is in arrears with the original contracted payments.

The DMP company should have explained to him that it is likely his credit file would be seriously affected by entering a DMP, although some fee charging DMPs do not draw attention to this.

Are all the accounts on his credit file now showing as fully paid/satisfied with no balance outstanding?

sirwiggum

I am a couple of years out of a DMP.

First thing the creditors did with me was either file a default or an Arrangement to Pay.
These are because the original repayment terms cannot be met, to negotiate a smaller payment with the DMP they actually need to default you or keep you on an arrangement.
The creditors mark down a late payment as it is late from the original repayment schedule. They should only really do this for 6 months before Defaulting.

The debt management company could be paid on the button, but as far as the creditors are concerned, the full money needs to reach them. I even had a creditor, who shall remain nameless but rhymes with Tloyds LSB, who would keep changing repayment dates then send letters out because the debt management repayment might miss a month because of this.

The Debt Management company should've warned [STRIKE]you [/STRIKE] him of adverse consequences to the credit file, but if they were anything like the one I had the misfortune to use, they'll likely have kept schtum and continued charging a fee for telling the creditors what repayments [STRIKE]you [/STRIKE] he can make.
In fact, as I paid on the 1st of the month, every single bank holiday weekend at the start of a month they'd phone me demanding that I pay them - even though it was a Direct Debit on the 1st!! Then they'd mess about when the amount reached them the next day (when the bank was open for transactions!) and therefore my creditors would get annoyed as the money hadn't reached them, etc. etc.
(Back in 2007 they even said to me that it'll *HELP* me get a mortgage, as it showed I was proactively trying to deal with my debts!... Maybe the world was a different place, pre-recession?)

A default, as I've found, is actually better on the account than an arrangement to pay. The default and the account it was on disappear after 6 years, whereas an Arrangement only disappears 6 years after the last payment!!

In terms of mortgages, it'll be difficult to get one while the default is on file. There may be non-mainstream lenders who would still let [STRIKE]you [/STRIKE] him borrow, but they'll likely be high interest, and [STRIKE]you[/STRIKE] he'll probably need a big deposit. Use the time of the defaults on file to save a deposit then go with a bank.

All in all, one doesn't get reduced payments for nothing, it takes a hit on the credit file for years. I've only recently got a credit card again (purely for business expenses).

bubblebath77_2

Hi all, thanks for your replies.

Tixy - I have asked him your questions, and he says from what he can remember he wasn't told anything about it effecting his credit file in a severe way (although, he is rather oblivious to these kinda things). And yes, the account/s he settled a few months ago are showing as settled.

Sirwiggum - I like your comment very much. However I still stand by this thread not being about me :-) I'm fortunate enough to have never borrowed money (apart from my credit card, which I very rarely use. Hmm, maybe I should dig it out and start using it more often). Truth is, [STRIKE]I[/STRIKE] my friend is not computer savvy enough to search himself. I appreciate you spending your time to reply so thank you for your very informative post, I shall pass on your comments on to him.

sirwiggum

No prob, tell him theres no shame on this forum in acknowledging debt problems.

Debt Management Companies I could lump in with estate agents on Ark 2....

If I was doing it all again I would struggle through those months of low salary and continue making payments, maybe even speaking directly to the banks and making temporary arrangements, as towards the end of the DMC I was paying more off to clear it anyway, not all creditors reduced interest, and the DMC were taking a hefty monthly admin fee!!

(I had initially contacted the CAB for debt help, but I actually found the particular branch I visited to be a little disinterested. NOT all CABs are like this - I've dealt with other branches on different issues that were a tremendous help).

Thrugelmir

bubblebath77 wrote: »

have asked him your questions, and he says from what he can remember he wasn't told anything about it effecting his credit file in a severe way (although, he is rather oblivious to these kinda things).

If you lend a friend £10 pounds and they eventually only repaid you £5 pounds. How would you feel if a later date they wanted to borrow £150 from you?