Confused about deafulats - should I pay in full or accept part settlement?

DebtFreeWannabe1989

Hi all

I have read through many of the threads on here but am still unsure what to do?

I have 5 defaults from 2017 / 2018 with various amounts on them. I am paying these back monthly but have recently been offered settlement lump sum amounts for a few.

My partner and I have been saving to buy a home and are hoping to buy in about 2 or 3 years. By then we should have approx. 20 to 30% deposit.

At this time my defaults will be 4 to 5 years old. Does anyone have any advice on if a mortgage application will be looked at more favourably if the defaults are paid in full or does a partial settlement but paid off sooner look better?

Thanks in advance.

Laura

Gaz83

Different lenders will look at them differently, but paying back all that you owe looks significantly better than only paying part of it.

DebtFreeWannabe1989

I meant to say defaults in the title..

Willing2Learn

Gaz83 wrote: »

Different lenders will look at them differently, but paying back all that you owe looks significantly better than only paying part of it.

Just to add that although paying in full looks better than a partial settlement, it is the default itself that is the 'toxic' data when lenders consider an application for credit.

DebtFreeWannabe1989

Willing2Learn wrote: »

Just to add that although paying in full looks better than a partial settlement, it is the default itself that is the 'toxic' data when lenders consider an application for credit.

Thanks, I just wasn't sure if clearing sooner for a settlement amount would look more favourable than paying it off in full but over a longer period.

From what I have read on here it sounds as though the passage of as much time as possible and at least a 25% deposit will help with a mortgage application

Carrot007

Unsettled defaults when you apply for a mortgage will likely be a no go for high street lending. defaults over 3 years old and settled either way should be fine for a winder choice. Preferably settled as long bakc as possible to look better. (If you partially settled a month ago and have a deposit for a mortgaage that is not going to look good is it!).


Either way be sure to use a whole of market borker that specialises in adverse credit situations to get the best deal. If the broker does not ask to see all credit reports then find a new one!

DebtFreeWannabe1989

Carrot007 wrote: »

Unsettled defaults when you apply for a mortgage will likely be a no go for high street lending. defaults over 3 years old and settled either way should be fine for a winder choice. Preferably settled as long bakc as possible to look better. (If you partially settled a month ago and have a deposit for a mortgaage that is not going to look good is it!).


Either way be sure to use a whole of market borker that specialises in adverse credit situations to get the best deal. If the broker does not ask to see all credit reports then find a new one!

Thankyou. I am tempted to save up and ay partial settlements on all before continuing to save towards the deposit. Then at least they will all look settled a few years before we go for a mortgage...

zainsenotrix

I think you should pay in full settlement due to the reason to getting free for once and then no need to get worried about next time settlements

Sa227

Hey, doesn't really matter tbh. It's always good to pay them off but doesn't make an impact to your application . I have 2 defaults one due to come off at end of month, the other in Aug. Totalling £2,500. Still got accepted for a mortage via broker.

[Deleted User]

Exactly.
You had to go via a broker rather than direct to a lender.

So you’re probably paying above average rates and fees