Partial Settlement?

Closcoeli

Hello

My husband has a few debts that he pays on a debt management plan, he has spoken to each of the companies separately and they have told him what they would accept as a partial settlement, we have the money to pay them all their partial settlements but don't know how bad that looks on his credit file, are we better paying in full the companies that appear on his credit file and carrying on with the repayment plan for the others or paying them all their partial settlements?

Thanks

Hazzinho

Full is better, PS doesn't look as good but I'm assuming the have defaulted anyway?

National_Debtline

Hi Closcoeli,

Welcome to MSE.

I would like to try and offer you further clarification about partial settlements. Hazzinho is correct that full payments are typically better than partial payments overall, but there are a few more things to consider.

Firstly, you cannot start to improve your credit score until you are debt free (all of the debts are classed as settled - partial or full). So the first thing to consider is how long it will take to complete your current Debt Management Plan (DMP)? If the DMP is going to take years to complete then that means you cannot start to rebuild your score for years. Sometimes, a partial settlement could help to put you in a position where you are able to start making improvements to your score sooner. Even once all of the debts are settled, your score will not instantly improve, it does takes time to rebuild.

Your credit file will not show how much you paid in a partial settlement, it will only show that you did not pay 100% of the money owed because the debt is not marked as fully settled. This is where a partial settlement can be damaging because future lenders have no details of what you paid to resolve the problem.

It is also important to note that credit scores are influenced by many factors, things such as your age, whether or not you are a home owner and/or on the electoral role, people you have financial associations with and your credit history (of course). So whilst full payments will generally have a better impact, it is difficult to say what the real difference would be on the score itself, between doing a full payment versus partial settlement, because so many factors are taken into consideration at the same time.

We do have a factsheet about Credit Referencing that may be helpful for you - https://www.nationaldebtline.org/EW/factsheets/Pages/05 EW Credit reference agencies and credit reports/Default.aspx

Closcoeli wrote: »

are we better paying in full the companies that appear on his credit file and carrying on with the repayment plan for the others or paying them all their partial settlements?

Also, please be careful about how you do the partial payments (if you do decide to take this route). If you do decide to do this, then I would suggest trying to do partial settlements with all of the creditors . Make sure you are dividing the lump sum you have fairly and proportionately to encourage the lenders to accept your offer whether they are on the credit file or not. Remember that there are 3 credit files, all of which hold slightly different information, so although information may not be on one, it doesn’t mean it isn’t on the others. Even if they are not on the credit file(s) now, they could be in the future. If you do partial settlements, but do not treat the creditors fairly, they may be more aggressive to take court action, resulting in a CCJ. This is then recorded on the credit file and potentially could put you back to square one. We also have a factsheet about this to try and help you weigh up your decision -https://www.nationaldebtline.org/EW/factsheets/Pages/24 EW Full and final settlement offers/Default.aspx

Laura
@natdebtline