Paying off defaults

dgrant88

Hi guys, I am looking to try and get a bit of advice on paying my default debts.

I currently have around £1800 in default debts through 4 different DCA's and 6 accounts. None of them are chasing me vigorously maybe just a few emails here and there and a couple of standard letters through the door. Because of these debts my credit rating is rubbish and I want to get it sorted in order to get me back on the right track. The debts I currently have are with Lowell, MEM Consumer Finance, Zebra Finance and Capquest. I am hoping to get away with paying around 50% of the current debt with written confirmation that all accounts will be marked as settled when payment has been made and I am aware that this is quite common.

My only concern is that as these defaults are all at least 2 years old, will it make any difference if I pay it off or not? I mean if I pay it off will anybody potential creditors really give a toss that I have no outstanding debt or will they just look at me having those previous defaults and decide I am a bad apple?

I would like to start saving going forward with a view of getting a mortgage with my GF however don't want my outstanding debt stopping us going forward. But I don't want to be paying cash to these companies if it won't make a bit of difference in the future.

I know this is a bit of a speel but any help is much appreciated.

PaulW922

If you have defaults on your file that will impact your ability to get a decent mortgage. It is better if the defaults are settled as any potential mortgage lender will see that you no longer owe the money, but even then, defaults are still serious blockers to mainstream rates. I would think that a future mortgage lender will look critically at any debts that are likely to impact your ability to pay the mortgage, and given you do not want to end up with CCJs or similar, and if you have the resources to pay the debts off it is probably a good idea to do so before you make any mortgage application.

Where debts are defaulted it is often possible to negotiate a reduced amount, especially when the debt has actually been sold on to a debt purchase company (as opposed to being managed by a debt collector on behalf of the original creditor). When a full or partial settlement is accepted the default should always be marked as 'satisfied' at Experian and Equifax, though it is just as well to get that in writing as you suggest.

Given your 'not too good' credit history, you might want to go to a mortgage broker who specialises in 'non standard' lending as they will be able to assess your circumstances and find the right lender. You will however end up with a broker fee added on to the loan and you should be prepaid to pay a premium on your mortgage rate for a few years.

I get the impression from your post that you are not currently paying anything towards the loans? If that is the case, as soon as you make contact you will probably engage the interest of the debt firm so be ready.

Doubtless someone will tell you to start challenging the debts etc but unless you are confident that there is no credit agreement to be produced that will be a fruitless path and one that as I said above, may engage the interests of the debt owner.

You say that you do not want to part with any cash if it won't make any difference. Bear in mind that whereas it is not as common as you may think, any one of these lenders can institute legal proceedings to recover the money.

I see one debt is with MEM Finance. Is that a Payday loan? If so and if it is over two years old then it may have lots of fees loaded on that the FCA have since banned by new regulations. It might be worth challenging any such fees, even going as far as the FOS.

happy_bunny_2

With settled defaults over 3 years, you should get some kind of credit card but the rate won't be low.

Partially settled will look slightly worse to prospective lenders, but better than outstanding defaults.