Are late payments viewed the same as defaults?

CalmCollect

Hi,

I'm in a lot of debt (4 credit cards and a loan, just over £20k) and started a DMP with Stepchange a few months ago. Unfortunately I didn't do my research and was unaware that most people on here advise you to make very small payments towards your debts before starting the DMP, so that most accounts default.
I'm managing to meet the minimum payments for some of my debts and am only paying slightly less than the minimum for the rest - but these have been marked as 'late payments' on my credit report - and I'm still being charged interest and fees for most of them.
I've read that any late payments stay on your credit report for 6 years - but do they have the same negative effect as defaults? If I were to successfully pay off my debts and be looking to get a mortgage in less than 6 years, would the late payments have exactly the same impact as defaults?
I'm asking because I'm not sure if I should 'start again' with the DMP and get my accounts to default first - or if I should just carry on as I am - as there's a chance my accounts won't ever end up defaulting.
Basically, I'm wondering if I've screwed this up - is my credit report now damaged beyond repair for 6 years - even without any defaults?

Thanks in advance!!

chattychappy

Every potential lender will treat information gained from a credit file according to their own policies.

But in general, late payments are not as serious. In fact, late payments are not reported as such, rather each month a lender reports whether the account is up-to-date or behind (and if so by how much). In the end, people who fall behind and then catch up are (in my opinion anyway) a better risk than people who fall behind and then default or make arrangements to pay. In these latter cases the lender is forgoing interest, charges and perhaps even the principal amount advanced. With late payers who catch up, the lender gets all their money including interest. It seems you have an arrangement to pay already?

That said, I wouldn't let the cashflow tale wag the rating dog. Be realistic. There is no point paying interest and charges if you think in the end you will default anyway.

[Deleted User]

I wouldn't worry too much about your credit file, right now.

I think you will struggle to get a mortgage, in the next 6 years, due to the DMP.

sourcrates

The problem you will have with your current situation, is that you have effectively, got an arrangement to pay, so your accounts are likely to be marked as such before too long.

AP markers stay on your credit file for 6 years AFTER you have paid off the debt, so potentially a very long time (12 years plus) wearas once an account defaults, it’s gone after 6 years regardless of what you do.

Best advice to those starting a DMP is to either pay £1 a month to each debt, or pay nothing, until defaulted, then start your DMP repayments.

Stepchange won’t advise you to do this, as they are funded by the banks, and there ultimate aim is to get you repaying the debts, one way or another, as soon as possible, regardless of the effect on your credit file.

CalmCollect

Thanks for your replies!

I think I have got an arrangement to pay on one of my accounts already - so I think it makes the most sense to try and get my accounts to default and then restart the DMP. Has anyone else done this? I assume Stepchange wouldn't want me to stop payments, so I'd need to go through another company when restarting the DMP.

If I stopped making payments for a few months, would this result in bailiffs showing up at my door? I live in a shared house at the moment and don't want my housemates getting any hassle. Plus I'd rather they didn't know about this situation if possible...

S1984

I am going through a similar situation where I have decided to stop my current DMP and enter it again more prepared (with an emergency amount saved)

With regards to the above question having spoke to more experienced members on here it seems the collection process is a long drawn out one where defaults can be applied, debts can be sold and over an extended period of time

The key thing is communication. I am writing to my creditors to confirm my financial situation has changed since entering the DMP and moving forward I will be dealing direct with them . I have requested details of my accounts so I can then send the repayment offer - this should allow me a couple of months to build some emergency money which will mean I don't miss payments and enter a lot better prepared

The unknown of CCJs and ballifs scare me also however it would seem there are a lot of people who have gone through DMPs and managed to come out debt free. Credit files get destroyed but this doesn't concern me as the last thing I want is credit right now - I need to enter this long journey (very long) and learn to manage money a hell of a lot better

sourcrates

CalmCollect wrote: »

Thanks for your replies!

I think I have got an arrangement to pay on one of my accounts already - so I think it makes the most sense to try and get my accounts to default and then restart the DMP. Has anyone else done this? I assume Stepchange wouldn't want me to stop payments, so I'd need to go through another company when restarting the DMP.

If I stopped making payments for a few months, would this result in bailiffs showing up at my door? I live in a shared house at the moment and don't want my housemates getting any hassle. Plus I'd rather they didn't know about this situation if possible...

Please don’t come out with random statements about bailiffs turning up.

Please do some research.

There is a procedure for eveything, in order for a bailiff to be engaged, first your creditor must obtain a county court judgement against you, you must then default on the judgement payments, then, and only then, is a bayliff just one option a creditor can choose.

You are 1000 miles away from that scenario just now.

Non payment is likely to lead to default and sale of the debt in 99% of cases, on rare occasions a creditor may seek legal action, but it can be avoided very easily.

This really is your best plan of action, there’s no reason why you cannot return to stepchange in 6 months time.

Even better, write and explain to your creditors what you are doing, you may be suorised how accommodating many will be, and yes, I’ve been there worn the t-shirt got the badge etc etc.

CalmCollect

sourcrates wrote: »

Please don’t come out with random statements about bailiffs turning up.

Please do some research.

There is a procedure for eveything, in order for a bailiff to be engaged, first your creditor must obtain a county court judgement against you, you must then default on the judgement payments, then, and only then, is a bayliff just one option a creditor can choose.

You are 1000 miles away from that scenario just now.

Non payment is likely to lead to default and sale of the debt in 99% of cases, on rare occasions a creditor may seek legal action, but it can be avoided very easily.

This really is your best plan of action, there’s no reason why you cannot return to stepchange in 6 months time.

Even better, write and explain to your creditors what you are doing, you may be suorised how accommodating many will be, and yes, I’ve been there worn the t-shirt got the badge etc etc.

Thank you. I will stop my payments and contact my creditors to let them know that my situation has changed. I've spent most of today reading further into this and will hopefully wrap my head around it soon!

sourcrates

Good plan !!!!!