Offers to debtors - credit rating affected further?

Ellie2380

I am currently paying off my debts using Payplan. I have approx 2 years to go on my plan and approx £4.5k to pay off. a couple of my creditors have written to me indicating they will discuss an offer for repayment with me. I have £2k that I can use.

Should my creditors accept a reduced payment total as final payment on the debt will this affect my credit rating further? I.e. Worse than if I paid off the full amount?

Most if the debts have defaults on them anyway.

sourcrates

Hi,
If there already defaulted, settling for less than the outstanding balance will make no difference really.
It will show as partially settled, rather than satisfied, but unless you intend getting further credit, it will not matter a jot !!!

Ellie2380

At some point I want to apply for a mortgage, not for 1-2years though.

fermi

Possible an mortgage lender may see it negatively, but as said it's by far far far far more likely that the fact of the default will be the overriding factor, and that a 'partial' flag will be negligible.

For example....




I would not a partial settlement would still be marked as satisfied, with the balance zeroed and showing nothing is left owed, but it just has the partial marker there to indicate that you did a deal to settle for less than the full amount.

DandelionPatrol

Ellie2380 wrote: »

At some point I want to apply for a mortgage, not for 1-2years though.

Ask on the Mortgages and Endowments forum. Despite the advice here, I think the view there is that defaults over 3 years old can be accepted, provided they are settled in full. I don't think a partial settlement marker is going to be good enough for the better lenders.

Alternatively, if all your debts are defaulted, they will come off your record entirely at 6 years, so could you wait that long?

Ellie2380

That's interesting thank you. I could wait probably that long to apply. I may try to get it marked as zero balances owed though. Will have a further think about it.

fermi

Any settlement, partial flag or otherwise, should show the balance owed as zeroed (in effect). A partial marker/flag is just in addition to that to show that was achieved that way rather than settled by paying it all.

slattsfam

I am about to pay off all my debts from a house sale and HSBC Repayment Services have offered to reduce my debt from £4,550 to £2,500 as a full and final settlement.
BUT
They also state that "Credit Reference Agencies require them to report the debt as partially settled which other lenders will see on my credit file"
AND
I will be needing to get a new mortgage in 5-6 months time so would will this have a negative impact on my credit score when applying for a new mortgage?

Advice most gratefully received!

fermi

Some lenders may be picky about it, but most will either just care that you did satisfy it one way or another partial or not, or or not care either way and just see a default as default.

Cedricthefrog

Partial settlement is frowned upon by lenders, be aware, especially if it quite recent and not say 2_3 years ago.

mwarby

Also worth considering this, yes you can avoid partially settled flag by settling in full, but how long will that take. Is it better to have a default partially settled now or fully settled months or years later. Would a credit scorecard or underwriter care about settled date, or just default date

Also would a mortgage lender like to see partially satisfied plus £2k more deposit, or no partially satisfied. I'd think the higher deposit would be favored.