Paying Off Debt At Discounted Rate - Effect On Credit File?

VolubleMeteorMother

Hi there, 

I have a query regarding the paying off of a debt with a debt collection company. I recently received a discount offer which was quite substantial (35% of the original sum) which I would actually be able to pay. I would not be able to afford the full amount and once I pay this one off I will finally be debt free. 

My worry is that the offer contains the text, “If you accept the discount and clear your balance, your account, if we report on your credit file, will be marked as ‘partially satisfied’, instead of ‘satisfied’.” 

My credit report currently has no defaults or anything on it and has actually reached a decent score. I am worried this will add something to my account that will be stuck on there for the next 6 years. I actually paid off a debt with the exact same company in 2021 (also discounted) and nothing at all appeared on my credit file. Looking back at that offer, it also included a similar line of text: “If appropriate, your credit file will show as ‘Default Partially Satisfied’ when you make a settlement, instead of ‘Default Satisfied’ if you have paid the account in full.” 

My main question really is, if I do pay the discounted offer, will something actually appear on my credit report or do they put those lines of text in there to scare people into paying the full amount and something would only appear if I already had a default on the account? 

I live in Scotland and so am not sure if that makes a difference at all? Any help would be appreciated. 

Thanks.

FlaatusGoat

VolubleMeteorMother said:

Hi there, 

I have a query regarding the paying off of a debt with a debt collection company. I recently received a discount offer which was quite substantial (35% of the original sum) which I would actually be able to pay. I would not be able to afford the full amount and once I pay this one off I will finally be debt free. 

My worry is that the offer contains the text, “If you accept the discount and clear your balance, your account, if we report on your credit file, will be marked as ‘partially satisfied’, instead of ‘satisfied’.” 

My credit report currently has no defaults or anything on it and has actually reached a decent score. I am worried this will add something to my account that will be stuck on there for the next 6 years. I actually paid off a debt with the exact same company in 2021 (also discounted) and nothing at all appeared on my credit file. Looking back at that offer, it also included a similar line of text: “If appropriate, your credit file will show as ‘Default Partially Satisfied’ when you make a settlement, instead of ‘Default Satisfied’ if you have paid the account in full.” 

My main question really is, if I do pay the discounted offer, will something actually appear on my credit report or do they put those lines of text in there to scare people into paying the full amount and something would only appear if I already had a default on the account? 

I live in Scotland and so am not sure if that makes a difference at all? Any help would be appreciated. 

Thanks.

I get why you're worried about how settling a debt at a discount might affect your credit report. Here's the scoop:

If you settle the debt for less than the full amount, it usually shows up as "partially satisfied" on your credit report, meaning you didn't pay the full amount. If you paid the whole debt, it would be marked as "satisfied," indicating the debt was fully cleared.

Having a debt marked as "partially satisfied" can negatively impact your credit score because it shows you didn't fulfill the original obligation. This mark can linger on your credit report for up to six years, similar to a default.

If your account doesn't already have a default, settling the debt at a discount shouldn't create a new default. However, it will still be marked as "partially satisfied," which can still affect your credit score.

Since you're in Scotland, it's worth checking if there are specific legal differences regarding debt settlement and credit reporting in your area. Consulting a financial advisor or legal expert could give you advice tailored to your situation.

Given your circumstances, it might be a good idea to talk to the debt collection company to understand how the settlement will be reported. You might also consider getting advice from a financial advisor to ensure you're making the best decision for your financial health.

fatbelly

Under Scottish law, if there has bern a period of 5 years of no acknowledgement by payment or in writing, then the debt is extinguished. This goes further than English law, where it is merely unenforceable.

Regarding your credit file, if the debt does not currently appear, maybe because the default was more than 6 years ago, then paying it does not create a fresh mark. 

If the debt does currently appear then paying it by settlement deal means that it should be marked partially settled rather than settled. It still disappears at the 6-year point.

These deals are always available on defaulted debts and being made an offer should be seen as an opening bid in a negotiation. 

Nasqueron

FlaatusGoat said:

VolubleMeteorMother said:

Hi there, 

I have a query regarding the paying off of a debt with a debt collection company. I recently received a discount offer which was quite substantial (35% of the original sum) which I would actually be able to pay. I would not be able to afford the full amount and once I pay this one off I will finally be debt free. 

My worry is that the offer contains the text, “If you accept the discount and clear your balance, your account, if we report on your credit file, will be marked as ‘partially satisfied’, instead of ‘satisfied’.” 

My credit report currently has no defaults or anything on it and has actually reached a decent score. I am worried this will add something to my account that will be stuck on there for the next 6 years. I actually paid off a debt with the exact same company in 2021 (also discounted) and nothing at all appeared on my credit file. Looking back at that offer, it also included a similar line of text: “If appropriate, your credit file will show as ‘Default Partially Satisfied’ when you make a settlement, instead of ‘Default Satisfied’ if you have paid the account in full.” 

My main question really is, if I do pay the discounted offer, will something actually appear on my credit report or do they put those lines of text in there to scare people into paying the full amount and something would only appear if I already had a default on the account? 

I live in Scotland and so am not sure if that makes a difference at all? Any help would be appreciated. 

Thanks.

I get why you're worried about how settling a debt at a discount might affect your credit report. Here's the scoop:

If you settle the debt for less than the full amount, it usually shows up as "partially satisfied" on your credit report, meaning you didn't pay the full amount. If you paid the whole debt, it would be marked as "satisfied," indicating the debt was fully cleared.

Having a debt marked as "partially satisfied" can negatively impact your credit score because it shows you didn't fulfill the original obligation. This mark can linger on your credit report for up to six years, similar to a default.

If your account doesn't already have a default, settling the debt at a discount shouldn't create a new default. However, it will still be marked as "partially satisfied," which can still affect your credit score.

Since you're in Scotland, it's worth checking if there are specific legal differences regarding debt settlement and credit reporting in your area. Consulting a financial advisor or legal expert could give you advice tailored to your situation.

Given your circumstances, it might be a good idea to talk to the debt collection company to understand how the settlement will be reported. You might also consider getting advice from a financial advisor to ensure you're making the best decision for your financial health.

Note that as ever, the score is a gimmick that nobody but you ever sees

VolubleMeteorMother

FlaatusGoat said:

If your account doesn't already have a default, settling the debt at a discount shouldn't create a new default. However, it will still be marked as "partially satisfied," which can still affect your credit score.

Hi there,

Thanks for replying. If the account doesn't already have a default how exactly will the partially satisfied note show up and does it essentially just create a new default just by being on there?

Thanks.

VolubleMeteorMother

fatbelly said:

Under Scottish law, if there has bern a period of 5 years of no acknowledgement by payment or in writing, then the debt is extinguished. This goes further than English law, where it is merely unenforceable.

Regarding your credit file, if the debt does not currently appear, maybe because the default was more than 6 years ago, then paying it does not create a fresh mark. 

If the debt does currently appear then paying it by settlement deal means that it should be marked partially settled rather than settled. It still disappears at the 6-year point.

These deals are always available on defaulted debts and being made an offer should be seen as an opening bid in a negotiation. 

Hi there,

Thanks for replying. Unfortunately they have been in touch regularly over the years for this debt so I won't be able to get out of by it being statute barred.

At the current time the debt does not appear at all on my credit file. I have signed up to 3 of the major ones and there is nothing on there and my rating is at a pretty decent level now which is why I am worried about ruining that.

Based on this, do you think that by paying it off at the discounted rate that nothing at all will consequently show up on my file?

Thanks.

VolubleMeteorMother

Nasqueron said:

Note that as ever, the score is a gimmick that nobody but you ever sees

Hi there.

I'm unsure what you mean by this? Surely the credit score is going to be seen by any lender to which you apply? Which it turn will affect their decision to lend to you?

Thanks.

sourcrates

VolubleMeteorMother said:

Nasqueron said:

Note that as ever, the score is a gimmick that nobody but you ever sees

Hi there.

I'm unsure what you mean by this? Surely the credit score is going to be seen by any lender to which you apply? Which it turn will affect their decision to lend to you?

Thanks.

No one see`s your credit score but you, no lenders, no one, its just a marketing gimmick in this country.

Lenders score you using their own scoring systems which the public has no access too.

If this debt is not currently being reported to your file, then nothing you do will change that, so take the best discount you can obtain, nothing will show on your credit file........defaulted debts only show for 6 years and are then automatically removed regardless of what you or anyone else does, so events after that fact are of no consequence credit file wise.
.

Nasqueron

sourcrates said:

VolubleMeteorMother said:

Nasqueron said:

Note that as ever, the score is a gimmick that nobody but you ever sees

Hi there.

I'm unsure what you mean by this? Surely the credit score is going to be seen by any lender to which you apply? Which it turn will affect their decision to lend to you?

Thanks.

No one see`s your credit score but you, no lenders, no one, its just a marketing gimmick in this country.

Lenders score you using their own scoring systems which the public has no access too.

If this debt is not currently being reported to your file, then nothing you do will change that, so take the best discount you can obtain, nothing will show on your credit file........defaulted debts only show for 6 years and are then automatically removed regardless of what you or anyone else does, so events after that fact are of no consequence credit file wise.
.

Just as an addition to this, some firms buy in scores from the CRAs (but again not based on the score you see). I saw a copy of an old decision making flow from someone who was low level at a small finance firm which was basically along the lines of "<100 = reject / 100-500 = review, >501 = approve without review" but it was 100% not the fake score we see.