Debt / Partial Settlement / Mortgages

HybridHermit

Hi all, I really appreciate any advice you can give me here. I've tried doing my own research but I keep seeing information which almost seems to conflict itself and I'm going in circles.

In essence, before my partner and I got together she struggled financially and ended up racking up some debt. I don't know all the details because she understandably doesn't like talking about it, but I've tried to piece together what I can and I'm trying to help resolve everything as neatly as possible.

These debts were transferred to debt collectors maybe 3 or so years ago, and with some vague numbers let's say the situation is something like-

£1000 owed to debt company A- paid off in full.

£4000 left owing to debt company B- offer spontaneously came from them last month to partially settle for £1500. Partner agreed and paid.

£5000 still owing to debt company C (I believe this is 'Link')- currently considering what our options are.

For context, we have a baby on the way which is due late this year, and I want our baby to come into the world without this debt hanging over us. We're not in an ideal position to be able to clear the remaining £5000, but if we were able to arrange a partial settlement we could probably stretch to £3500 or so.

I didn't know partial settlement was an option, and my partner took that route with debt company B when it showed up because it seemed too good to miss, but did so before I could research into what it might mean.

We also want to get a mortgage in the future, which is going to be many years away yet, but I want to understand how these choices may affect us.

With all that in mind, these are the questions bouncing around my head right now-

What are the cons of a partial settlement?

Obviously the bonus is being able to pay less than the actual figure. But what impact is left on you as a result of making a partial settlement instead? The only things we're really worried about regarding her credit file are applying for mortgage in 6+ years, and looking to rent a new property in between now and then (my credit score is fine with zero marks on it).

I've tried reading into it and saw that these things come off your credit file after 6 years, but see mixed reports on whether that is 6 years after you first get the debt, or 6 years after you've paid it? Will the 'numbers' be written off, but then on a mortgage application there'll be a big 'settled' or 'partially settled' set of wording which might hurt us?

Even if there are cons of doing this, given that there's already been a partial settlement with company B, is it going to make any difference doing the same with company C?

What information do companies typically want if you make an offer of a partial settlement?

For full transparency, the plan is for me to send across the money to my partner to clear this debt, and I do technically have enough to clear the full amount, BUT the extra money I would need is sat in a help-to-buy ISA which heavy penalises me for withdrawing for any reason other than a house deposit. Of course if I can save £1000+ on this repayment I would much rather do so as that's extra money readily available for when little one arrives.

So while I could get the full amount, I don't want to withdraw from that account, and I want to save as much as possible for our baby. Therefore, would a debt company demand to see her and my financial information when making an offer for example, or am I vastly overthinking this?

Partial vs full settlement on a mortgage application-

I was under the impression that if we cleared the debt, and then waited 6 years, we would then be 'OK' to go ahead with a mortgage application, so we're looking at doing this in say 2032. When that time comes, are we going to be any worse-off for having gone down the partial settlement route vs doing it full? Or will it make no difference at that point?

What I'm struggling with understanding is how a lot of places seem to imply that after 6 years your debt is removed regardless, so what the ramifications are for only partially settling if it gets cleared either way? I feel like I'm missing something obvious here.

Thank you so much to anyone who reads all of the above and can offer any advice, I really appreciate you.

Isthisforreal99

It will be 6 years after the settlement (partial or full) that it drops off her credit file and if you are talking 6 years before applying for then obviously partial is the way to go. Bear in mind that even although it drops off a credit file after 6 years lenders will retain internal records so they are best avoided in future.

sourcrates

Hi,

Its actually pretty straight forward, I assume all your debt has defaulted?

The debt will show on a credit file for 6 years after it defaults, regardless of what you do.

If you settle it in full, it will show as such, if you partially settle, it will show as a partial settlement.

The whole entry, everything, will be automatically removed on the 6th anniversary of the date of default, no matter what you do, it will be gone after that date, so if the debt is already 3 years old, it will vanish in another 3 years, paid, unpaid, partially paid, or fully paid.

The benefit of partial settlement is that it saves you money, that is the main reason to do it.

fatbelly

So you say you are going around in circles with conflicting advice and then our first two replies seem contradictory!

Let me have a go at unpacking. An entry on a credit file is removed in full and nothing shows, 6 years after it is defaulted or settled, whichever happens sooner. Now those three entries may well have been defaulted 3/4 yeats ago, you won't know till you check. It is possible though unlikely that they do not show at all, or show some other status. Hopefully they are defaulted 3/4 years ago so will be removed in 2/3 years time

There is no harm in trying for a partial settlement though Link are not always helpful. Search this forum. If this was a Consumer Credit Act debt like a loan or credit card then you may want to do a s77-9 request first, sometimes called a cca request. If they cannot comply, then the debt is unenforceable and you can ignore it. Underlying this is that you do not want a court claim on this though that is unlikely, as a ccj would create a new mark.

SpireCaptain

https://forums.moneysavingexpert.com/discussion/comment/81975914#Comment_81975914

That's interesting and something to take heed of now more banks are being brought under each others umbrella albeit if they have separate licenses still. Such as defaults on MBNA CC would be linked to Halifax or Lloyds internal systems possibly got a mortgage application.

I've read about a few instances of a partially settled Amex CC stopping a new Amex application 10 years later until they'd brought their account up to full settlement value even though it was 4 years since any trace on their credit file. Although AMEX are notorious for being a stickler.

ManyWays

A lender can retain internal records for as long as they want.

But there are a lot of large, good high street mortgage lenders out there! Halifax, Nationwide, NatWest, Santander, Barclays, HSBC, Skipton, Yorkshire, Coventry, Leeds…

sourcrates

I once had a conversation with a Halifax data controller, I`d had some issues with an old closed account at the time, that was resurrected on my credit report after 10 years for some inexplicable reason, anyway, according to them, they keep internal records of past customer behaviour for seven years, after which it is then destroyed.

I would guess that other mainstream banks follow similar practices.