Should I clear a loan early or pay the arrears and cotinue making regular payments to build score

Heady_Tulip

This is a bit of an odd one.  I have a business loan that has outstanding arrears on it from a 2 years ago when my business suffered a downturn.  I was making reduced payments for approximately 18 months  before going back to making the required amount plus a litte extra to start  paying the arrears down.  In October I will be in a position to pay the entire loan off (which was my plan). However,  I've since been advised that as I have a default on this account I may be better offpaying the arrears off and continuing to make the regular payments for another year so that my payment history records up to date payments  from October.  If I pay off the entire amount it would record as satisfied and may look like I made a partial payment arrengment to wipe the debt.  I am hoping to apply for a mortgage in November as I will finally have the downpayment for a house and am worried that this default is killing my credit score.  I have no other debts  - Credit Cards are all cleared each month and no car payment.  What should I do to improve my credit scoring  - Pay off total or pay off arrrears and maintain monthly payments?   Thank you for reading and hopefully for your advice.

[Deleted User]

Clear the debt.

It will drop your score further but that's fine, because lenders only look at your files and credit history, not the pretend score.

You need to get the default settled.