Mortgage Chances

Bazy

Hi,
I currently have 10+ defaults on my credit file with a total balance of about £55k between loans and credit cards. I am fully aware of the mistakes I've made and the bad decisions I made in terms of finances. Without making excuses, some life changes contributed to my financial decline. That aside, I made the decision last year to stop making payments to my creditors and to default on my agreements. My intention with this was to finally cut the cycle of paying massive monthly repayments with large interest which was going absolutely nowhere and just leaving me in a constant downward spiral. The overall aim was to basically bite the bullet, take the hit of the defaults being on my credit file for 6 years and then hopefully in 6 years(by 2030) the defaults will have dropped off my file and I will be able to get a mortgage. Getting a mortgage is my main goal. In this period since my accounts have defaulted, I have set up repayment arrangements with each company I owe to individually - I have not entered into a DMP with stepchange etc, I am simply just paying back directly to the DCA's. With the total debt being so high, I can't see my repayments clearing the total debt balance by 2030. I am due a lump sum in the next 12-24  months for approx 30-40k. I have been wondering what the best option would be in terms of utilising the lump sum. Do I clear the majority of the debt or do I hold on to it for a deposit for a mortgage and just continue to make repayments to the DCA's as normal? I also am currently in the process of making complaints to several lenders for unaffordable lending (loans with updraft and Monzo) which were approved automatically despite my already large debt balance. So the hope is that maybe something comes of this and could potentially reduce my debt balance further or potentially have some of the defaults removed. So I think the question I am looking answers to is - should I use the lump sum for a mortgage deposit when I receive it in the next 1-2 years (by which time my defaults will be 2-3 years old), or do I use the lump sum to reduce the debt balance and try to save for a deposit through my saving etc (which could take some time). Many thanks and all suggestions are appreciated.

DE_612183

I'd clear the debt - affordability is I would have thought more important than an actual deposit.

As an aside - are you a First Time buyer? In which case out some into a LISA.

Bazy

I am a First Time Buyer yes. It isn't something I've looked at yet in terms of the LISA, but I would definitely like to know the benefits of it which I will look in to. 

Would clearing the debt make any difference to a mortgage application as the debt has already been defaulted anyway?

born_again

If you have defaults in the last 6 years. You may/will find it harder to get a mainstream mortgage. Best to use a broker, but rates maybe higher given your past.

ACG

I think a lot depends on what payments you are making. 
If you are making token payments of £5 on each account, the affect it has on the your mortgage will be quite slim. If you are making more significant payments then it might have a larger effect. 

I wouldnt want to say what I think you should do. There is a moral answer and a "in the real world" answer... 

Bazy

Thank you all for your responses. They are greatly appreciated.

@ACG the payments are token payments at present to basically keep the DCA's at arms length and avoid any CCJ's being registered against me. My income is gradually increasing so I do intend to start increasing the payments at some point in the near future. 
Hypothetically speaking, if I decided to just continue to make token payments to the DCA's for the foreseeable, do you believe it would still be possible to apply for a mortgage in 2-3 years time and use the full lump sum amount as a mortgage deposit? At this point the defaults would be around 3-4 years old and I would use 100% of the lump sum for the deposit, but would obviously still have the outstanding balances to the DCA's. I understand mainstream lenders would be a straight out NO, but is this something you believe adverse credit brokers could assist with?