Settle default account?

Gd1_2

Hi all, am new here so hopefully i have done this right....

Currently tearing my hair out so anyone who can give me a steer would be great!


Briefly i am trying to estalish the most effective way of improving my credit score, particulalry around a few nasty defaults i foolishly picked up a few years back.

Whilst i appreciate that all debts shpuld in a n ideal world be settled in full, i want to know of there is any other reason to do this from a credit rating perspective- is a settled default less damainging for prospective lenders than a default which hasnt been settled? From what i can tell there seems to be little difference which begs the question, why would debtors work hard to satisfy these amounts when the advers consequnces of the defulat remain (for 6 years).

I have a couple of relatively small default balances on file, and want to know if i should pay them off (prior to mortgage application) or use the funds to go dorectky towards a deposit.

Even where consensus points to my paying off defaults being better than not doing so, from a crdit rating perspective, how quickly can i expect the payments to be reflected in my credit file?

Finally, if the debts were sold by the original creditor, should i liaise with the debt collectors or the banks etc? I have two defaults with one lender- pme small one not so small. I a, servicing one debt amount via a DCA and would consider paying off teh smaller default amount (as above) and would like to know who to speak with should this be teh right course to take.

Many thanks i nadvance
Gd

Westminster

Another thing to be aware of - even if an account has a balance outstanding with a default date of 6 years ago which then falls off your credit file, the creditor can still apply for a CCJ against you which will then appear on your file for another 6 years if you don't settle it promptly.

So you need to either agree a full & final settlement with your creditors for less than the balance owed (this will be marked as PS - partial settlement) or pay off in full (this would be seen much more favourably by a mortgage underwriter I suspect!)

The path you take would depend on how long until the 6th anniversary of the default date, the balances, how much money you have available and when you are planning on applying for a mortgage.

Hazzinho

If you have a number of defaults I'd recommend a broker as you may struggle to be approved with most lenders.

Thrugelmir

Gd1 wrote: »

is a settled default less damainging for prospective lenders than a default which hasnt been settled? From what i can tell there seems to be little difference which begs the question,

You lend me a tenner. I pay you £8 back.

I then ask you to lend me another tenner?

What do you think?

Common sense really. Lenders will look more favourably on people that do repay their debts in full.

Gd1_2

Thanks for that. I do undrstand the principle of repaying debts, but sadly common snense is not as easily applicable in modern finance, as in your example. If i only repay you £8 rather than £10, you are unlikely to sell the right to recalim £2 to a thrid party are you (the ntire basis of a modern credit economy)? But i certainly welcome your input and agree entirely

fermi

Gd1 wrote: »

Whilst i appreciate that all debts shpuld in a n ideal world be settled in full, i want to know of there is any other reason to do this from a credit rating perspective- is a settled default less damainging for prospective lenders than a default which hasnt been settled?

From earlier this year.

Thrugelmir

Gd1 wrote: »

Thanks for that. I do undrstand the principle of repaying debts, but sadly common snense is not as easily applicable in modern finance, as in your example. If i only repay you £8 rather than £10, you are unlikely to sell the right to recalim £2 to a thrid party are you (the ntire basis of a modern credit economy)? But i certainly welcome your input and agree entirely

My point was to illustrate how finance works. Nothing to do with modern finance either. What's changed is people thinking that they are being clever in some way. By repaying as little as they can get away with.

What's really changed is the technology. Databases can keep vast amounts of easily accessible data. Whereas in the past, exchange of data was far more difficult.

Gd1_2

I hope i wasnt implying that i was somehow asking for advice on how to wilfully avoid paying what is in principle owed to my creditors. My original query was about the best course of action given limited resources- would it be prudent for me (or indeed amyone else) to pay over a sum of money to settle a debt specifically to access more credit (i.e a mortgage) in circumstances where this does not materially improve one's credit ratsimg, amd could in fact be better applied towards a deposit.

Again i acept the principled line you take and Will bow to your experience in this area, however i do think it is necessary to be pragmatic when borrowing, and indeed dealing with financial institutions generally. They are not averse on the whole to interpreting rules and regulations to their advantage, of course, and would not for an instant consider such principled conduct when such does not advance their case (and hinder the other contratcing party).

Best regards and anks again for your help.

GD

tomxlisa

Westminster wrote: »

Another thing to be aware of - even if an account has a balance outstanding with a default date of 6 years ago which then falls off your credit file, the creditor can still apply for a CCJ against you which will then appear on your file for another 6 years if you don't settle it promptly.

So you need to either agree a full & final settlement with your creditors for less than the balance owed (this will be marked as PS - partial settlement) or pay off in full (this would be seen much more favourably by a mortgage underwriter I suspect!)

The path you take would depend on how long until the 6th anniversary of the default date, the balances, how much money you have available and when you are planning on applying for a mortgage.

Surely they can't apply for a CCJ if the debt is older than 6 years, unless this is just in a statute barred situation, I had a debt, it wasn't for much monies but they said themselves in the letter I received that it couldn't be taken to court as the time limit had passed.

Thrugelmir

Gd1 wrote: »

I hope i wasnt implying that i was somehow asking for advice on how to wilfully avoid paying what is in principle owed to my creditors.

My comments weren't directed at you on a personal level.

Gd1_2

Westminster wrote: »

Another thing to be aware of - even if an account has a balance outstanding with a default date of 6 years ago which then falls off your credit file, the creditor can still apply for a CCJ against you which will then appear on your file for another 6 years if you don't settle it promptly.

So you need to either agree a full & final settlement with your creditors for less than the balance owed (this will be marked as PS - partial settlement) or pay off in full (this would be seen much more favourably by a mortgage underwriter I suspect!)

The path you take would depend on how long until the 6th anniversary of the default date, the balances, how much money you have available and when you are planning on applying for a mortgage.

No problem, thanks all for your help