Defaults starting to hit credit file…guidance?

allystar

Hello, seeking advice!

I signed up to StepChange in December and deferred my first payment until 1st Feb.

Embarrassingly, I have around £80k debt across 3 loans and a number of credit cards.

I have only missed the January payment on all debts…

question is should I pause with StepChange and let all debts default before starting the StepChange payments?

if I did this, I’d likely be able to save and create a buffer, while reducing the default period. Im guessing some lenders can take a long time to put a default on my credit file.

Any advice welcome x

p.s if I do this, do I simply say to StepChange what im doing or ask to pause starting?  Thanks in advance x

kimwp

Best to default first - it allows you to build up a buffer as you say, and is better for your credit history (defaults stay on your history for six years; arrangements to pay stay on for six years after the debt is settled).

Step change may not be happy with you pausing, but you can cancel and go back to them or to another debt charity for free help or manage your dmp yourself.

Have you set up a new basic account for your income to go into, unconnected to the institutions you owe money to? It seems it's not often used, but they have the right to take money from other accounts you have with them to pay off the accounts that are in debit.

kimwp

Oh, also- only start paying them more than token amounts after default when you have saved enough as an emergency fund. 

Rob5342

The other advantage to defaulting is that it means the debts are more likely to be sold to debt collectors, and they will be open to reduced settlement offers further down the line. 

Stepchange act in the creditors best interests rather than yours. Personally I would just manage it myself so I didn't have the extra hassle of trying to keep Stepchange happy. 

allystar

Thank you so much for replying! My bank is RBS, I have no debt with them and none of my lenders are part of that group…should I still set up a new account?

Any experience on how long defaults take…3/6 months?

Grumpelstiltskin

Does your bank account have an overdraft ? If so get a basic account with no overdraft and transfer all vital payments over manually don't use the switch service.

How long do defaults take? How long is a piece of string.

kimwp

Grumpelstiltskin said:

Does your bank account have an overdraft ? If so get a basic account with no overdraft and transfer all vital payments over manually don't use the switch service.

How long do defaults take? How long is a piece of string.

Why does an overdraft matter?

EssexHebridean

It might be 3/6 months, but it could be longer. The longer they take though, the more time you have for saving that emergency fund, getting your budget straight and in order, and then maybe even being able to start building a "fighting fund" to enable full and final settlement offers along the line. 

Grumpelstiltskin

kimwp said:

Grumpelstiltskin said:

Does your bank account have an overdraft ? If so get a basic account with no overdraft and transfer all vital payments over manually don't use the switch service.

How long do defaults take? How long is a piece of string.

Why does an overdraft matter?

Because it's a form of credit easily available if it's there.

kimwp

EssexHebridean said:

It might be 3/6 months, but it could be longer. The longer they take though, the more time you have for saving that emergency fund, getting your budget straight and in order, and then maybe even being able to start building a "fighting fund" to enable full and final settlement offers along the line. 

Though just because they default, doesn't mean you need to start paying anything more than token amounts - do that when you are in a financial position to do so.

kimwp

Grumpelstiltskin said:

kimwp said:

Grumpelstiltskin said:

Does your bank account have an overdraft ? If so get a basic account with no overdraft and transfer all vital payments over manually don't use the switch service.

How long do defaults take? How long is a piece of string.

Why does an overdraft matter?

Because it's a form of credit easily available if it's there.

Would it not be easier to ask the bank to remove the option?