We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!

Is it worth settling debts?

Options
Hi,

When I was 18 then I created couple of credit accounts on sites like littlewoods. My credit score is very bad right now and I would like to start fixing it to ensure when I want to get a mortgage and whatnot in the future (2 to 3 yrs from now) then I am able to do that.

My current debts are as follows:

£412 default date 06/01/2017
£277 default date 20/01/2017
£142 default date 14/08/2018

My question is that is paying of these debts in full going to make my credit score/history better? Is it worth it or should I wait for the 6 years? Also, I am planning to do the LOQBOX plan for £200pm (£2400pa). Do you think its worth to do it and how much could it improve my credit score?

I have current account opened and I have a pay monthly phone contract (no payments missed). Are there any secured credit cards that I can open? I tried opening aqua card but I was rejected. Any other tips that I could do to improve my credit?

Any help is much appreciated
Thanks

Comments

  • You should settle debts regardless of applying for a mortgage or not.

    Ignore any reference to your credit score/rating as it's not a factor used in lending.

    Don't bother with Loqbox - waste of time and money.

    Try an eligibility checker to see if you can qualify for a sub-prime credit card (Vanquis, Aqua, Capital One etc.) and use the card for your normal spends and pay it back in full each month after the statement is produced.
  • Willing2Learn
    Willing2Learn Posts: 6,294 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    edited 27 June 2019 at 10:31AM
    It is always good to settle your accounts as then it provides proof to lenders that you can be trusted.

    With regard to your Aqua rejection:
    Apart from the defaults, is there any other negative data on your credit files?
    And are you on the Electoral Register?
    Have you recently moved?

    I suggest you apply for a CapitalOne card as they do a secured card where they take a deposit from you as security. You cannot apply for the secured card direct, they need to offer the card and will only do so if they have declined you for their Classic card.

    And ignore your score! Lenders neither see nor use your credit score.

    Edit: And welcome to the forum :)
    I work within the voluntary sector, supporting vulnerable people to rebuild their lives.

    I love my job

    :smiley:
  • T-G-C
    T-G-C Posts: 591 Forumite
    500 Posts
    !!! wrote: »
    You should settle debts regardless of applying for a mortgage or not.

    Ignore any reference to your credit score/rating as it's not a factor used in lending.

    Don't bother with Loqbox - waste of time and money.

    Try an eligibility checker to see if you can qualify for a sub-prime credit card (Vanquis, Aqua, Capital One etc.) and use the card for your normal spends and pay it back in full each month after the statement is produced.

    LOQBOX doesn't cost anything, other than the charge to release funds at the end, but whether or not the £30 sacrifice is worthwhile depends on how bad your credit file is. If someone has multiple defaults and non-payment marks, one extra loan account in good standing isn't going to be able to counter the damage and will have no positive influence. However, someone with a limited history or similar might find it a useful solution if wanting to avoid getting actual credit. Other lenders cannot see the name of the account, so it cannot be discriminated against.

    Using a subprime credit card in the fashion you described is good for establishing a record and trust, but paying in full each month could deter a future lender due to them being seen as unprofitable. If intending to move to mainstream, it is advisable to use a small portion of your credit limit to carry a balance each month, which demonstrates that you can make payments on-time but are also a profitable customer, even if the actual interest charged on the balance is peanuts. This isn't advisable for people who cannot manage debt responsibly or would be tempted to keep spending until they are beyond 50% utilization, which then starts to create a negative impact, unless on a 0% plan.
    Advice provided from this account does not consist of any professional knowledge. For professional debt advice, please contact either National Debtline or StepChange. Advice may consist of personal experience, opinion and/or informational sources.
  • T-G-C wrote: »
    LOQBOX doesn't cost anything, other than the charge to release funds at the end, but whether or not the £30 sacrifice is worthwhile depends on how bad your credit file is. If someone has multiple defaults and non-payment marks, one extra loan account in good standing isn't going to be able to counter the damage and will have no positive influence. However, someone with a limited history or similar might find it a useful solution if wanting to avoid getting actual credit. Other lenders cannot see the name of the account, so it cannot be discriminated against.

    Using a subprime credit card in the fashion you described is good for establishing a record and trust, but paying in full each month could deter a future lender due to them being seen as unprofitable. If intending to move to mainstream, it is advisable to use a small portion of your credit limit to carry a balance each month, which demonstrates that you can make payments on-time but are also a profitable customer, even if the actual interest charged on the balance is peanuts. This isn't advisable for people who cannot manage debt responsibly or would be tempted to keep spending until they are beyond 50% utilization, which then starts to create a negative impact, unless on a 0% plan.

    Having any sort of loan on your file, however low it is, is a bad thing.

    Likewise, carrying a balance is a bad thing.
    It has nothing to do with lender profitability.
    In all the years I've had CC's I have always paid them off in full each month, yet still get offers, high limits etc.
    Paying it off in full shows you can borrow money and pay it off in a timely fashion.
  • PixelPound
    PixelPound Posts: 3,057 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    You want to settle the debts, tying to wait for six years in the hope they will fall off is risky, especially as it could end up with CCJs,then that's another six years your credit file is affected. You don't want defaults still with balances on when applying for a mortgage, though preferably wait until the six years is up before applying.

    There could be various reasons for the vanquis rejection. Have you checked your credit file,as stated there are eligibility checkers and cap one have one on their website. You just need a credit card that you can use and pay off in full each month, so APR or offers don't matter as much.
  • System
    System Posts: 178,340 Community Admin
    10,000 Posts Photogenic Name Dropper
    How can you default on £140??
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
  • beany_bot wrote: »
    How can you default on £140??

    Mobile phone bill, utility bill, credit card balance that you never paid....
  • System
    System Posts: 178,340 Community Admin
    10,000 Posts Photogenic Name Dropper
    !!! wrote: »
    Mobile phone bill, utility bill, credit card balance that you never paid....
    But it's only a hundred quid! Thats proper reckless.
    This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.9K Banking & Borrowing
  • 253.1K Reduce Debt & Boost Income
  • 453.5K Spending & Discounts
  • 243.9K Work, Benefits & Business
  • 598.7K Mortgages, Homes & Bills
  • 176.9K Life & Family
  • 257.1K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.