How does becoming debt free actually work?

quiney2012

Hi guys,

I currently have around £10,000 debt which I managed to rake up when I was 18.

Currently I have a few catalogues which are all up to date but I still have a poor credit score due to having the debts from years ago.

In around 16 weeks as I have been saving money I will be able to clear my debt fully.

What will my credit score be like when I have cleared all the debt?

I eventually would like to get a mortgage and that's what I'm aiming for.

Thanks in advance

Tixy

How quickly your credit file will look 'clean' will depend on what you file shows currently.

If you have any accounts with defaults they will stay on your file for 6 years from the default date. Even if settled they will still impact on your ability to get credit, though to a lesser extent than unsatisfied defaults.
Same go for any CCJs.

If you have accounts without defaults they stay on your file for 6 years from the date you settle, and any missed payments within the last 6 years remain visible on your file for those 6 years.

It is possible to get a mortgage with defaults still visible on file, but you'd usually need a larger deposit and pay higher rates than someone with a clean file.
Any CCJs

quiney2012

Thank you, I plan to wait a few years before I get a mortgage as I need to save again for the deposit.

I think it'll be best to save for 6 years after clearing my debt to get a better rate. It will also mean I have a bigger deposit.

corbyboy

You can't quantify your credit score. Any company that gives you a number is basically making it up using their own internal algorithm.

However, if you fully clear your debt then your credit file will show you no longer have any debt. Which is a good thing if you want to borrow any more money.

DCFC79

What your score will be like once you paid it off is irrelevant as the score isnt seen by lenders.

Thrugelmir

quiney2012 wrote: »

What will my credit score be like when I have cleared all the debt?

What matters is how lenders view your profile. If you've previously defaulted on a lender they are unlikely to forget when it comes to a mortgage application. As lenders too maintain their own internal records.

SnowTiger

quiney2012 wrote: »

Hi guys,

I currently have around £10,000 debt which I managed to rake up when I was 18.

Currently I have a few catalogues which are all up to date but I still have a poor credit score due to having the debts from years ago.

In around 16 weeks as I have been saving money I will be able to clear my debt fully.

What will my credit score be like when I have cleared all the debt?

I eventually would like to get a mortgage and that's what I'm aiming for.

Why are the debts from years ago affecting you now? Are these unpaid debts or is there a poor payment history? It'll all drop off your credit reports after six years.

As for the catalogues; unless it's BNPL (Buy Now Pay Later) you should pay it off as quickly as possible so that you pay less interest. Don't wait until you have all the money saved up.