Settling defaults

aymz1983

Hello

I know from reading these boards that some people will advocate paying off debts that have been defaulted even though they drop off your report - others will advocate the paying of them.

I wonder if anyone could help me, well, perhaps not help per se, but perhaps offer an opinion as to which is best?

I have just gone through credit files and written down what defaults I have and when they expire (saves logging onto CRA websites all the time!).

I have several defaults from accounts that I hadn't paid. I would like to do so from now as I am in a much better position to do so than I was and have been previously.

Some are due to come off between 2015 and 2016 but the rest are 2017-2020 (most in the 17/18 year range, only 1 default from feb this year, which was added 6 months after i actually defaulted in '13)

Currently at uni studying law - will be going into second year in September. Due to graduate 2016, how long it takes me from there to get into training I couldn't say (as obviously very competitive). Hopefully, not very long!
I've read that for certain memberships required by various legal bodies, credit checks are carried out, although I don't know fully in what capacity, if at all. So needless to say, I would like to have a much better credit file than the one I do now. (Although this is the plan anyway, as in a few years time (8, 9 years maybe) I'd like to start looking at buying a home, rather than renting forever more. I've already started saving as I know it will take some time to build a decent deposit)

So...on that basis, would it be better to pay them off in full and have them showing as defaulted but satisfied, or to leave them as defaults with balances outstanding? I have no plans to obtain any further credit in the near future (I have one current catalogue account which i am paying off every month as read that that could help improve rating) and over the last 8 months have completely overhauled the way finances are dealt with in our house so we are much better managing money, but I would still be interested to know how the difference could be perceived by lenders.

As I have the money coming in anyway I feel just use it to pay off in full, but I'd be interested in knowing other opinions.

Tixy

One thing you don't seem to have mentioned, that could affect a career in the legal industry (as well as obtaining a mortgage) is that if your debts are not settled then there is a chance your creditors could take legal action against you and obtain CCJs which will then impact on your credit file for longer than the defaults would have been.

I assume you are aware that creditors have 6years from when you last stopped paying (or acknowledged the debt) to commence legal action, and then if successful a CCJ would be on file for 6years from the date of judgement (assuming you would not be in a position to settle the debt in full within a month).

Therefore potentially in 8,9 years time when you would be hoping to obtain a mortgage your credit file could still have visible CCJs.

To answer the question of how potential lenders would consider defaulted debts that were paid/unpaid. With unpaid defaults it will be very difficult to get mainstream credit until they have dropped off in 6years time. With paid defaults it should become easier to gradually obtain subprime credit as they get older and possibly eventually some more mainstream credit a little before the last defaults drop off your file.

aymz1983

Thanks I shall be getting them paid over the next 12 months, so they should all show as satisfied. Wasnt really aware that ccj could still happen so will definitely make sure these are paid off as cant afford to take any chances. I tookthe jump at 30 to do my degree, I dont want it to have been for nothing if I cant get into the job I want for that reason

Tixy

It is possible that perhaps none of your creditors would decide to take court action, but it would be a risk.

Some people do risk it, and especially if they are in a position where they could settle a debt in full if court action was taken then its a lower risk (as if you pay the CCJ in full within a month of the judgement it doesn't go on your credit file).