Turning a negative into a positive?

supermassive

Am I right in thinking that if I have a default on my credit file, then by getting a credit card (vanquis or other for poor credit rating) and paying it all on there, then paying off the vanquis card minimum payments...

It's so hard to word this post, oddly.

Default, paid by credit card, pay credit card minimum payments monthly - this means the default was ended with the payment, and the credit card makes you look trustworthy as you pay back gradually?

Or do you have to pay it off in full each month?

And how much does a mobile phone default really affect your credit file? (it's the only default I have... because I absolutely forgot I had it)

National_Debtline

Hi supermassive

Your credit file won't reflect the method of payment used to pay the balance that was responsible for the default marker. Also, once the default is recorded it stays there for the full six years, whether you subsequently settled it or not.

Taking out and then maintaining contractual minimum payments or more on a card should indeed have a positive effect on your credit file. Of course if you are only making the minimum payments on a Vanquis card balance, you will be paying (often hefty) interest on the remainder. On the other hand, paying the balance in full each month may indicate to other potential lenders that they may not make any money out of you - it's a tricky one.

It's impossible to quantify how much a single default affects your credit file, as different lenders will attach different degrees of significance to it. For example, the average mortgage lender's expectations will be much higher than those of a mobile phone company.

You may want to look at adding a Notice of Correction to your report, in order to mitigate the effect of this default - especially if you had the means to pay this debt when it became due and failed to do so simply out of forgetfulness rather than genuine financial difficulty. More info here:

https://www.nationaldebtline.org/EW/factsheets/Pages/05%20EW%20Credit%20reference%20agencies%20and%20credit%20reports/Page-04.aspx

Dennis
@natdebtline

Tixy

A default will have a significant impact on your ability to get accepted for new credit.

A default for say £200 on a mobile phone probably won't affect you as much as a default on a debt of say £5,000 for a credit card.

Paying off a default will mean it shows as satisfied, which for some potential lenders will make a difference to an unsatisfied default.

Personally I don't think your plan is worthwhile. Even if you can get accepted for a subprime card if you only repay the minimum then you will be paying unnecessary interest, and at a subprime rate. And you will still have the default on your file, which will still put off mainstream lenders.

In terms of rebuilding your rating only paying minimum payments on a credit card is not the best way. You'd be better off using the card for a couple of purchases you make anyway and clearing in full each statement.

supermassive

The t-mobile debt is £400, and I was made redundant 4 months into my contract.

(it was also a capped contract at £30pcm, but they kept charging me different amounts.. apparently capped doesn't mean capped. Who knew?)

Is my best option to just pay off the debt once I have the money and that'll show the default as settled for 6 years?

Tixy

I would negotiate a repayment plan with them to pay what you can afford.

If you pay nothing at all whilst you save up to pay it off then there is a greater risk of them taking court action against you to obtain a CCJ.

The default and account will drop off your file 6years after the default date, the date it is satisfied doesn't affect that.

supermassive

They haven't ever chased the debt. I only became aware of it when I checked my credit file a few weeks ago. I asked them to send me a new bill to my current address. It's still registered under T-mobile, so they've not even passed the debt on, so I doubt there'd be much of a chance that a CCJ would be on its way.

I know it's a bit dishonest, but if I complain that they've got the wrong address - which they have - is there any chance I could negotiate for full payment and removal of the default, or is that completely unrealistic?

The reason I ask, is that, yes it's the wrong address so they may have been sending letters - but I DID change my address with them - TWICE since living at the address they hold... and also the fact that it only recently showed up on my file, but dragged months of defaults with it by magic.

Don't ask - don't get, I suppose.