Credit score following repayment of debt

blackbirdxx

A few years ago my girlfriend got into quite bad credit card debt to the tune of about £25K. What with monthly interest her situation was getting worse every month. I suggested she contact a debt company which she did. Arrangements were made with them for regular repayments with an end date which now expires in about 6 months time. All credit (sic) to her as she has kept up her repayments very well and needs congratulating. 

I wanted to know how this will affect her credit score? How long will it take to recover from this debt as far is credit is concerned? Also, I have heard of other cases where discounts have been offered. I know my girlfriend has never been offered any of this, probably because she is seen as a regular payer and will payback all the money. Seems unfortunate she hasn't been offered anything, however, as a great deal of this debt has consisted of ridiculous amounts of interest.

Anyway, just wondered what others thought or have experienced themselves?
thanks in advance....

Ebe_Scrooge

Her credit score will shoot up to 998 ...... or it may plummet to 42.  Neither of which matters one jot, as the score is neither seen nor used by any lender.

However, an AP will have a detrimental effect on her credit history.  If she's paid off everything she owes, then this will have a much lesser impact than if she just plain defaulted - but any lender will see the AP marker and this may impact her ability to secure further credit for a while.  The effect of any negative marker on one's credit history will diminish with time, especially if there is plenty of positive history to offset it.

Fighter1986

First and foremost credit scores given to you by credit reference agencies are largely meaningless. When you obtain your credit report from Experian / Equifax / Trans Union / etc there are two aspects to it:

Your Credit File
Your Credit Score

Lenders see your credit file when they perform a credit search, they do not see the number you're shown when you sign in. 

What matters is how these accounts appear on your partners credit file. Did they default? How long ago? Do they show as not defaulted but in arrears? Do they show has having an "Arrangement to pay"? Did any of them go to court?

Generally speaking, most lenders look to see at least a three year gap from when the last piece of negative information was entered on to a customers credit file but that's a gross oversimplification. All lenders have their own criteria and their own scoring system. Your partners credit worthiness will have taken a beating from this course of action, and once the debts are settled it will start to improve as long as she continues to maintain her finances responsibly.

Don't be tempted by the likes of Loqbox / BITS / anyone else who claims to be able to "Improve your credit score" off the back of a monthly fee. Simply having a mobile phone and insurance on monthly installments has exactly the same effect and doesn't throw money down the drain.

Your best bet is to have your partner check her credit files with all three agencies - Equifax, Experian, and Call Credit, once the final payments have been made, to ensure all the accounts do show £NIL balances, and deal with any lender that hasn't updated her credit file accordingly.

I'd leave a clear gap of twelve months after she's settled everything before looking at opening any new accounts as this shows she isn't under debt stress again desparately trying to jump out of the frying pan into the fire.

And be pragmatic about what accounts she opens. Don't do it for the sake of being able to. 

gizmo111

As said above what is important is how they have been reported to the CRA's.  Get a copy of all three of her credit files and come back with some more info.  If they have been defaulted a few years ago they may even already have dropped off her file.

marmite_girl

Hiya well I can tell you exactly what happended to me.  Husband walked out many years ago leaving me with two young boys. Upshot was I couldn't afford to pay interest on my various cards. Got in touch with all credit card providers who agreed to "freeze" interest.  I continued paying off all my credit card debt, less interest as agreed, BUT this went down as a default on my credit rating and it took SIX YEARS for this to clear. So for 6 years I couldn't get anything on credit and I had a 49% card to try and restart my credit rating.  Finally the six years passed and I could finally get a 0% credit card to clear my balance. 

DCFC79

marmite_girl said:

Hiya well I can tell you exactly what happended to me.  Husband walked out many years ago leaving me with two young boys. Upshot was I couldn't afford to pay interest on my various cards. Got in touch with all credit card providers who agreed to "freeze" interest.  I continued paying off all my credit card debt, less interest as agreed, BUT this went down as a default on my credit rating and it took SIX YEARS for this to clear. So for 6 years I couldn't get anything on credit and I had a 49% card to try and restart my credit rating.  Finally the six years passed and I could finally get a 0% credit card to clear my balance. 

Your rating wasnt affected as lenders dont see it, your history is seen by lenders.