Pay a defaulted debt or interest attracting debt?

orangesmartie

Hi, hoping someone can help point me in the right direction.

A few years ago I lost my job and defaulted on a Barclays credit card (balance of approx. £8000). I agreed to pay them £50 a month and have been doing so every month without fail. I do have other credit cards, which are all up to date with payments.

I am now self employed and want to look at a new mortgage, but my credit rating is dire, largely due to this default. Credit report shows about £6,600 still owing (I’ve never had any further correspondence from Barclaycard in about 4 years).

Would I be better to use a chunk of money to pay off an interest attracting credit card, which will reduce outgoings but not impact credit rating significantly; or use a chunk of money to try and negotiate a F&F settlement on the defaulted debt?

Grateful for any advice.

National_Debtline

Hi

It’s going to come down to the policy of each potential mortgage lender so it’s difficult to say really. On one hand a F&F on the defaulted card would most likely look a lot better than it sitting there unsatisfied, but you would then be paying interest on the other card which could affect your monthly affordability.

I think you should contact a ‘whole of market’ mortgage broker as they will be in a better position to advise you on this.

James
@natdebtline

glentoran99

From my own experience I was told by my lender that they wouldn't even consider unsatisfied defaults, obviously other lenders do,

orangesmartie

National_Debtline wrote: »

Hi

It’s going to come down to the policy of each potential mortgage lender so it’s difficult to say really. On one hand a F&F on the defaulted card would most likely look a lot better than it sitting there unsatisfied, but you would then be paying interest on the other card which could affect your monthly affordability.

I think you should contact a ‘whole of market’ mortgage broker as they will be in a better position to advise you on this.

James
@natdebtline

Thanks. I already have a mortgage broker and a range of mortgage options, I just want to improve my situation before proceeding. The interest/affordability of the other payments isn't such a big issue overall, but I will contact my broker and ask her advice - I hadn't even thought of that! Thanks!

glentoran99 wrote: »

From my own experience I was told by my lender that they wouldn't even consider unsatisfied defaults, obviously other lenders do,

Thanks, handy to know.

National_Debtline

There's a specific section of this forum about mortgages and I believe some people who work as brokers post there. It's worth enquiring in there as you might get some help from people with a range of experiences.

James
@natdebtline