Does settling an account early affect credit rating?

WifeandMummy

Hi All,

My hubs has a debt with wescott that he currently pays each month. He often gets asked by them if he would like to settle his debt and they offer a settlement figure. Up until recently we've never been in a position to do this however in the next few months we will be. I just wondered if it's a wise thing to do and what affect it could have on his credit file as am I right in thinking it may show as satisfied, and this can look bad? Hubs has got 1/5 on noddle and the debt in question is showing as a default and has done for 3 years. The plan is to improve his credit rating so obviously don't want to do anything that might make it worse / harder in the future.

Thanks x

Penelopa.Pitstop

Debt will be settled which is good thing. It's fully paid.

CherlokHomes

Paying the debt off will do very little in proving your credit worthiness due to the account going in to default which will stay on your husbands credit file for another 3 years whether it's paid or not.

Paying it off is the best way forward as the debt won't go away but thinking you'll be seen as a lower risk To lenders I'm afraid won't happen just yet due to the default.

longtermplanner

With 10k of debts (from your signature line), then getting a settlement amount for this one will mean that you can pay the others off quicker. The top priority has to be paying off the debt at the lowest price possible.

WifeandMummy

Thank you for the replies everyone. All appreciated x

jamesd

One thing to remember about settlements: it's a negotiation. It's not necessary to accept their first offer and you can make counter-offers.

StuC75

Do consider though that it may be marked as a partial settlement, so the devil in the detail here is if it is being marked as Paid in Full, or only as a Partial \ Full & Final Settlement..

WifeandMummy

Thank you Stu. That was my main concern that it would show as partially settled so wasn't sure if it would be better to continue with payments and pay off full amount.

I know it won't make much difference to his credit but with it being bad anyway don't want to do anything to make it worse either x

Tixy

Having it show as partially satisfied isn't likely to make his file any worse than the default is already doing.

And of course the whole record (including that it was partially satisfied) will drop off his file 6years after the default date as per the file.

WifeandMummy

So the default date is March 2011 so will it drop off March 2017? X

Tixy

Yes, March 17

If you are making a written offer for a full & final settlement then do be careful what you request (some people request that the default is removed but then the debt and missed payments stay on their credit file much longer - i.e. 6years from when you settle the debt).

If you want to make a written offer national debtline has a useful factsheet.