Saving for a mortgage - default on credit score

Katy93

I have £1500 left on a defaulted account (dated July 2016) charging no interest. I’ve been re-paying £10 a month for around 2 years, and upped it to £40 about 3 months ago. I’m also trying to get out of my £1275 overdraft, reducing it by £100-£150 a month. I’m also currently saving for a deposit on a house in small monthly amounts and hoping to have one together by 2022/23. I have been reading up on defaulted accounts and I’m thinking of reducing my monthly payments back to £10.

My question is, would it be best prioritising getting the default account paid off, or focus instead on paying more towards my mortgage deposit and only make small incremental payments on the defaulted account as it will be removed from my credit score in 2022 anyway?

I don’t anticipate needing or applying for much credit until applying for a mortgage so that’s not really a priority.

Willing2Learn

When will the default be removed from your credit file? Are you saying the default date is July 2016? A default severely damages how you are viewed by lenders. The negative impact of the default gradually reduces over time.

You need to stop dipping in to your overdraft as it makes it look as though you are living beyond your means. Clear the overdraft balance completely. Keep the overdraft facility as it looks good on your file, demonstrating a creditor trusts you.

Katy93 wrote: »

I don’t anticipate needing or applying for much credit until applying for a mortgage so that’s not really a priority.

Apply for and increasing your credit profile is not necessarily a negative. If you do apply for any credit accounts the important thing is to rigidly stick to the terms of the credit agreement, as that is vital when building a positive credit profile

[Deleted User]

Debts are a priority above savings.

Clear as much as you can without reducing any payments - if anything you need to be increasing payments to clear it quicker.

Katy93

Thanks for your reply, I have read that even if I pay it off in full now (which isn’t an option) it will remain on my score for another two and a bit years, and then will be wiped off my file regardless of whether I have paid it off or not. So it seems futile to delay saving for a mortgage to put all I can into paying off a debt that will be wiped from my file in a couple of years anyway

Willing2Learn

Katy93 wrote: »

Thanks for your reply, I have read that even if I pay it off in full now (which isn’t an option) it will remain on my score for another two and a bit years, and then will be wiped off my file regardless of whether I have paid it off or not. So it seems futile to delay saving for a mortgage to put all I can into paying off a debt that will be wiped from my file in a couple of years anyway

The defaulted account will be automatically removed from your credit files, six years from the date of the default, regardless of whether or not you settle the account. It could be argued that a defaulted account which has been paid in full looks better than one which has only been partially satisfied.

Is the default date July 2016? If so, then that means the account will be automatically removed from your credit files July 2022.

You can still get a mortgage with a default on your file. But it may be necessary to use the services of a mortgage broker who specialises in adverse data.

[Deleted User]

Yes it will be “wiped” but if not paid you’ll still need to pay it off regardless of it being removed from your files.