Pay the debt in full or negotiate discount

azkeel

Hi all! Hope someone here may steer me in the right direction.

Over the years I got into some serious credit debt that I put into DMP in June 2019. I have been sticking to the agreement since. It appears that I may be in a position to completely pay off the debt in a month or so. I will also be looking to take the mortgage in 18 months (joined with someone with good credit rating). Since some of the debt is with likes of Cabot's I may be able to negotiate a lower settlement amounts but I understand this affects may credit score. Am I better off paying the debt in full and get slightly better credit report or save around £2,000 towards the deposit?

[Deleted User]

The defaults has done the damage, as you no longer stuck to the agreement after that point. The important thing now is settling it.

Take the discount if you can get one. Any difference in credit score between the two strategies is irrelevant.

[Deleted User]

No lender sees the gimmick "score", they judge you on history - a 999 score with a DMP, debts etc is not going to get a mortgage vs a 500 score with good history.

If you pay off less than you owe on top of being in the DMP, that might not look good to future lenders either. 18 months is not a huge time to heal your credit history, paying off the debt in full and waiting until defaults disappear would be ideal but a bigger deposit will help you get the loan so maybe delay it and save more?

PRAISETHESUN

The default has already done it's damage. A fully settled default will look better than a partially settled one in the eyes of lenders, but a default either way will put a lot of lenders off until it falls off your credit files. I'd take any discount you're offered and get it settled so you can move on. Make sure to use a mortgage broker who specialises in adverse credit when you start looking to buy your new home.