Will settling a reduced debt negatively affect my credit score?

Londonmatt_2

I will be getting some money this week and i plan on using it to settle a credit card debt.

I emailed MBNA and explained that while i plan on settling my debt with them i wont have enough to settle the full amount and asked about them reducing my debt in order for me to pay it off in full. They replied and said they would be willing to consider it as lately iv'e only been making the minimum payment and asked me to make an offer.

In their email they said that me having my debt reduced by them would negatively affect my credit score.

I have a couple of questions;

1. I owe them £2800. What would be a realistic amount to offer settling?
2. How badly will settling a reduced debt affect my score? If my goal is improving my score would it be better to to pay what i can now and the rest at a later date or better to settle a reduced debt and close the account?

DCFC79

It could make it go down or up or stay where it is but what number your score will be won't be seen by lenders, it's only seen by you and you only.

MallyGirl

your credit history will show a partially settled debt which won't be looked on favourably by future lenders. Just use what you have to bring down the balance and work hard to get rid of the rest - there is no easy way out that has no consequences

pcman1985

MallyGirl wrote: »

your credit history will show a partially settled debt which won't be looked on favourably by future lenders. Just use what you have to bring down the balance and work hard to get rid of the rest - there is no easy way out that has no consequences

Unless you pay the debt ON TIME and In FULL

Nasqueron

If you think in simple terms:

You borrowed some money
You are struggling to pay it back
You want to get the account closed off by paying back less than you owe in full

Why would a future lender look upon that favourably - a clear risk you might not pay them back either so they're likely to offer worse rates than someone who paid off in full even if it took longer

jonnyjonjonjunior

I think it really depends on the lender/circumstances.

For my own two-penneth and without wishing to humblebrag, I took out a private student loan with a company called SallieMae (American firm that briefly operated in the UK).

When they pulled out the UK market they sold their portfolio to CapQuest. I'd been paying it off consistently (never missed a payment) for years and so had completely paid down the original loan. But it was an expensive loan (I was a naive borrower in those days) and I took a punt that it was costing CapQuest more to service the portfolio/my loan than it would to keep it/my loan on their books. So I offered (and had accepted an offer) to pay 50% of the outstanding amount (remembering I'd paid off the capital a long while back). My offer was made on the basis that the loan would be marked as fully settled with '£0' owing. They said that was fine as I'd not accrued any arrears. So if you can claim the same, make a similar request?

Yes of course it would've been better for OP to settle the debt in full. But if there's a solution that's equitable to the bank and him, I say try it.

Good luck

JJJJJ