Clearing debts effect on mortgage

WinnieB

Hello,

I have been in a DMP with PayPlan since the end of 2012. I have three debts amounting to around 7k.

I am currently in a position where i can clear the entire debt.

Payplan are keen to arrange a settlement figure and approach my creditors, their example is around 5k to be shared equally.

My credit report shows two defaults dating from 2012 which I am aware will be on my report 6 years from this date.

I am keen to start working towards a mortgage with my partner and am aware that the defaults will pose a significant issue.

I have also been given advice that if i pay off my debts fully, to the penny, this will be marked on my credit ref and may make the above process more likely.

My question is, does it really make any difference to mortgage or credit lenders whether I have paid my debts of in full (to the penny) or made a full and final settlement? Or is it just the default they will be looking at?

I want to clear my debts whatever happens, but want to make sure i am making the most sensible, cost effective choice.

Thanks!

modder25

WinnieB wrote: »

Hello,

I have been in a DMP with PayPlan since the end of 2012. I have three debts amounting to around 7k.

I am currently in a position where i can clear the entire debt.

Payplan are keen to arrange a settlement figure and approach my creditors, their example is around 5k to be shared equally.

My credit report shows two defaults dating from 2012 which I am aware will be on my report 6 years from this date.

I am keen to start working towards a mortgage with my partner and am aware that the defaults will pose a significant issue.

I have also been given advice that if i pay off my debts fully, to the penny, this will be marked on my credit ref and may make the above process more likely.

My question is, does it really make any difference to mortgage or credit lenders whether I have paid my debts of in full (to the penny) or made a full and final settlement? Or is it just the default they will be looking at?

I want to clear my debts whatever happens, but want to make sure i am making the most sensible, cost effective choice.

Thanks!

You should probably look at that as if you were a lender...

Shall I lend this person money? Even though their previous creditors only received some of their money back??

Say that back to yourself and you will probably have your answer.

WinnieB

Thanks modder25, I see what your saying..

Do you think they would also think, this person borrowed money, paid it back in full, BUT still defaulted on three accounts. Resulting in the same outcome as having made a partial settlement.

Is it a case of seeing the defaults and 'computer says no' or is there actual reference on my credit rating that the debt has been paid off in full (to the penny) which may work in my favour for future borrowing?

Its a difference of almost 2k so i just want to try and understand the process and wondered whether anyone had had any experience similar to this.

Thanks

modder25

WinnieB wrote: »

Thanks modder25, I see what your saying..

Do you think they would also think, this person borrowed money, paid it back in full, BUT still defaulted on three accounts. Resulting in the same outcome as having made a partial settlement.

Is it a case of seeing the defaults and 'computer says no' or is there actual reference on my credit rating that the debt has been paid off in full (to the penny) which may work in my favour for future borrowing?

Its a difference of almost 2k so i just want to try and understand the process and wondered whether anyone had had any experience similar to this.

Thanks

I would say complete settled defaults look a lot better than partial settlements, how old are the defaults?

Some lenders have automatic declines for existing defaults and CCJs etc and some dont, this would depend on the lender.

Another thing you could try is settling the debt and asking that they take the defaults off your file as a gesture of goodwill, may not work but worth a try.