Paying off Debt in full

thestarks

Hello, My wife and I have been in debt up to our eyeballs for the last few years and are currently on a DMP with Stepchange, we have just inherited some money and want to clear our debt.
Our credit score is poor and we want to improve it ASAP, are we better off paying each debt in full or could we try to get a reduced amount.
Is there going to be a great difference on our credit file if it shows the debt partially settled rather than settled? many thanks

enthusiasticsaver

It will take a while for your credit score to improve if you are on a DMP. If a debt is shown as partially settled then this is not as good as full and finals. That is what you should try and negotiate if you are not going to pay the debt off in full. Tackle each creditor separately or stepchange may do it for you.

sourcrates

Hi,

Can i ask why your credit score is so important to you ?

The term "full and final settlement" is a little misleading, if full settlement were made, then you would pay each outstanding balance, in full.

It should just be called "final settlement deal" in my opinion, with this the creditor accepts an offer to settle once and for all, for less than the outstanding balance.

In both instances your credit file will be marked accordingly, as you have been on a DMP, its likely negative info from that will take up to 6 years to be removed, your so called "credit score" wont be anything to write home about, so i would settle each debt for as little as possible, and i would do the job myself, and make sure any deal i obtained was confirmed in writing before i parted with a penny.

PixelPound

If you are wanting to use the funds to pay the debts and not to acquire new debt (e.g. improve score because you want a mortgage) then your score isn't important. As has been said the fact that you have been in a DMP will affect your credit rating for a while. Making the money stretch by negotiating final settlement figures is best. Be prepared for making lots of calls, and call each to see how much of a discount they will apply - emphasise that it will be paid in one lump sum (by all means tell them its an inheritance, so they know its not regular income, and you are using it to pay off those giving the biggest discounts) which may make them willing to negotiate and get it in writing.
Yes they will only show as partially satisfied, but you have the defaults on there anyway for 6 years. Getting as debt free as possible, or paying off as many, means you can concentrate on the rest and then you will have money to use for other stuff rather than debts.

fatbelly

Here's a standard letter so you can make the opening offer in writing

https://www.nationaldebtline.org/EW/sampleletters/Pages/Full-and-final-settlement-offers-%28sole-name%29.aspx

and if you want to do cca requests first use this

https://www.nationaldebtline.org/EW/sampleletters/Pages/Information-about-your-agreement-under-the-Consumer-Credit-Act-%28sole-name%29.aspx

NCC-1701

sourcrates wrote: »

Sorry, no galaxy class star ships allowed 😉

I checked and the forum rules don't mention that at all, ablative armour whilst not perfect does it's job. A Board Guide should be a bit more clued on 'The Rules' IMHO.:D

sourcrates

NCC-1701 wrote: »

I checked and the forum rules don't mention that at all, ablative armour whilst not perfect does it's job. A Board Guide should be a bit more clued on 'The Rules' IMHO.:D

My sheilds are up scotty !!!

thestarks

Hello All,

Thank you so much for all of your advice, I will be calling all my creditors over the next couple of days and offering 70% of what I owe...would this be a reasonable amount to start from?
The long term plan is to get a mortgage but appreciate that it is likely to be at least 6 years before it is worth us looking into....thanks again, I will keep you posted on how I get on

fatbelly

thestarks wrote: »

Hello All,

Thank you so much for all of your advice, I will be calling all my creditors over the next couple of days and offering 70% of what I owe...would this be a reasonable amount to start from?
The long term plan is to get a mortgage but appreciate that it is likely to be at least 6 years before it is worth us looking into....thanks again, I will keep you posted on how I get on

Actually, no.

Start much lower. 70% gives no room for manoeuvre - you might as well pay in full. I would say 35% is a better starting point though others say lower than that!

Also you need to start and end this process in writing - which is why I posted a link to the standard letter earlier.

And ... I still recommend starting the process with a cca request where this is appropriate.

This will take more effort than just phoning and offering 70% but it will end with some evidence of the deal, and unless you only owe a few hundred pounds, the savings will be substantial.

worried_jim

Don't step change offer to do this on your behalf?

Jln

Hi

I was in a similar position last year, I decided to pay off all my debt and settle in full - I owed the money so it was my debt to repay

I have then acquired a mortgage with NatWest - this took a while as my credit history was rubbish but what I had going for me was the fact this was old debt, I paid it in full and I had not acquired any further debt for years and i have a good salary with a stable role (NHS) Also some of my old debt had dropped off (post 6 years). I still have dmp on my credit file and it will be a few more years until it all disappears