What will happen?

HaydenB

I have recently posted a few messages on here getting advice on making a full and final settlement offer and negotations that will follow, etc.

Anyway, there has been a bit of progress with my financial circumstances with me now possibly going to be in a position to repay in full the debts that I owe. If and when I am able to pay in full what I owe, what happens to my credit rating? Will it still take a number of years for it to improve? Will it suddenly turn to excellent? Will I still struggle to get a mortgage on a decent rate?

CalumHeath

Only you see your credit rating - whether your credit rating is excellent, bad, 5 out of 5 or gold, sliver or bronze or thumbs up means nothing. Credit reference agencies don't make lending decisions (they'll be the first to tell you this) which is a good example of why their rating of you really is irrelevant.

Lenders only see the actual reported information (and it's up to them how they interpret it and use it in the decision-making process). A credit agreement (which is usually most of the entries on your report) will stay on for six years form the date the account was settled/written off/defaulted. It should show an accurate history of how you conducted the account - this will include details of late payments and partial settlements and whatnot.

sourcrates

As above, but also, the further back in your credit history, negative information is, the less impact it will have where lending decisions are concerned.

HaydenB

OK, so the next question...should I use the money to settle my debts in full or try negotiate the lowest settlement? Best not risk it and pay in full if I have the cash?

CalumHeath

Well that's up to you but whatever you decide will be recorded by the lender. If accepted, a partial settlement might be good in the short term for your cash-flow situation but there's a good chance it'll limit your borrowing options in the future (see why your credit rating is irrelevant?).

If you don't plan on applying for any further credit then a partial settlement might be an option. Also, if your credit history already makes for bad reading (late payments, exceeding agreed limits etc) then a partial settlement might just be a drop in the ocean in the scheme of things; it depends how you've conducted all your credit accounts generally.

HaydenB

OK thanks. Generally I would like to think I have handled my credit accounts in a decent way. Was fully up to date with all payments until I entered the DMP and havent missed any DMP payments since I took it out 5 years ago. Will see what happens but am waiting for PayPlan for some advice on the way to proceed should the money come in.

CalumHeath

Good luck - I hope it works out for you.

HaydenB

I am still a little bit lost on what to do as my creditors have started responding to my offers of part settlement.

My house is getting valued this week so I am almost definitely going to be going through with selling up. My partner and I will then start looking for our own house to buy once my debts are sorted. If in my shoes would you a) settle my debts in full with the equity released from selling my house or b) seek part settlement with my debts?

sourcrates

HaydenB wrote: »

I am still a little bit lost on what to do as my creditors have started responding to my offers of part settlement.

My house is getting valued this week so I am almost definitely going to be going through with selling up. My partner and I will then start looking for our own house to buy once my debts are sorted. If in my shoes would you a) settle my debts in full with the equity released from selling my house or b) seek part settlement with my debts?

It really makes little difference to your credit file, if you settle in full or part.
Settlement negotiations for debt, are no different to haggling down the price of a house, you should always try to get the best deal, then move on.

HaydenB

OK, so a mortgage company wouldnt/couldnt look at my credit file and "oh, bad man, he didnt repay his debts in full" or "oh, good man, he repaid all his debts in full"?

I know I might be repeating myself somewhat but I need to be really sure on my course of action.

sourcrates

Do you already have defaults, and/or late payments on your file ?

If so, your file is trashed anyway, so whatever you choose to do with your remaining debt, it won't matter.

If on the other hand you have a clean file, and wish it to stay that way, settle in full.