A reader asked if starting to pay a defaulted account will help his credit score. The simple answer is No!
But there are very good reasons why paying defaulted debts will improve your general credit situation, making it easier for you to get a loan, a mortgage or a credit card in future. That credit rating number isn’t the only thing that matters!
To start, it’s good to know what your credit history is now by checking all three credit reference agencies.
Six years is the important date
A defaulted account will drop off your credit record six years after the default date.
It doesn’t matter what happens after the default – whether you pay the account in full, start paying it, agree a partial settlement or don’t pay anything at all, the account will still be deleted after six years.
So find out what all your default dates are. If you think one is too late, read What Should the Default Date Be? which explains how to get an incorrect date changed.
Your credit record gets better after six years unless…
This may sound as though your credit score will get a lot better after six years even if you pay nothing. This is correct, but there is one big exception – your creditor may take you to court and get a County Court Judgment (CCJ). This CCJ would then stay on your file for another six years. Most lenders regard a default as bad but a CCJ as worse.
You may be hoping this doesn’t happen, unfortunately after five years and a few months, a debt collector may contact you and threaten court action if you don’t set up a payment arrangement. If you have moved and not told the creditor your new address, you could get a CCJ without being aware of it.
If this doesn’t happen and the defaulted account drops off, then your credit score will improve immediately. How much will depend on what else is on your credit record – if you have a lot of other debts still showing you may not notice the difference until the last ones go.
Older defaults are less bad for your credit score
Your credit record starts recovering from a default before the end of the six years. I asked Experian how their credit rating calculations changed as a default gets older. The following numbers show what happens to Experian’s credit score if there is only one default and if nothing else changes on your credit record:
- in last 2 years – 350 points
- 2-4 years ago – 250 points
- 4-6 years ago – 200 points.
In practice there is almost always something else changing every month, so you shouldn’t expect to see those exact numbers but they give a feel for what is going on. I think Equifax and Call Credit have a similar approach but their numbers may differ. (For some more examples of how much different things affect your credit score, read How much will my credit score change if… ? )
Your credit score doesn’t improve faster if you settle the debt, but…
Most people will expect that if they repay a defaulted debt their credit rating will suddenly improve. This doesn’t happen. So you may wonder why you should bother!
There are two very important reasons to start to repay a defaulted debt.
- if you are making payments a lender is a lot less likely to go to court for a CCJ. A CCJ is much worse for your credit record than a default, and it would be on there for another six years.
- lenders all make their own assessments, they don’t just use a credit score. Many lenders regard a settled default, as much less of a problem. So by repaying a defaulted debt you are more likely to get approved for a new loan.
That last point is especially important for mortgage applications. You are very unlikely to get a mortgage at a reasonable rate if you have unpaid defaults. The sooner you can repay them the better. Each lender sets their own rules, but a current rule of thumb is that if all your defaults are over three years old and they have been repaid for more than a year, it’s worth talking to a broker about whether a mortgage is possible.
Is it worth making low payments to a defaulted account?
Low payments won’t make much of a dent in your debt, even if interest and charges are frozen. There are positive reasons in favour of token payments – once agreed with your creditors, they will reduce the hassle you get and also make it less likely that you will get a CCJ – but they aren’t going to improve your credit record or make it more likely you will get more credit. If you expect your situation to improve, then low payments are a good option, but if this seems unlikely then you should probably look at what your alternatives are.
Conclusion
So although the answer to the reader’s question was No – repaying defaulted debts won’t improve his credit score faster, this isn’t really the full picture. A better reply is:
Your credit score will improve gradually as your defaults get older. This doesn’t speed up when you repay a defaulted debt, but some lenders are only likely to lend to you once defaults have been paid. And starting to repay debts makes a CCJ much less likely, which would make your credit record worse.
This article was originally written in 2015. It was updated in 2017 with the details of how Experian treats defaults as they get older.
Some debts Settled and some Satisfied – why?
Can you get a mortgage if you have debts?
Is your old debt statute barred?
Babs Marshall says
I had 2 barclaycard debts, one of which I settled with full and final settlement offer, however the other I just missed coming to agreement with them for Full and final settlement as they had sold the debt to another company and it is now in the hands of LINK FINANCIAL OUTSOURCING who refused 2 offers I made to them, the second of which was higher % than Barclaycard accepted on my other debt. I thought it reasonable at 55% ( a conditional F&F settlement loan from family): I have also sent them £1 as I want proof that they have a legal right to deal with my debt and asked for a total reduction in monthly payments from £160 to £5, as I am self employed and can no longer afford any more than that, and I am sure I signed nothing to consent my debt being sent to any third party? Can some one please advise? link is the only company to be awkward and unhelpful and quite frankly greedy as they buy debts for next to nothing compared to amount owed!
Sara (Debt Camel) says
I assume your £1 was asking for Consumer Credit Act agreement – that is a sensible move.
Have you supplied them with an income & expenditure statement showing what you can afford to pay them each month? And a letter from your relative offering a final settlement? See https://debtcamel.co.uk/full-final-settlement-rejected/.
You don’t have to sign anything for a debt to be sold. There will have been a clause in your original agreement that lets the creditor do this.
Shirley says
Hi can I just say your site is great and very helpful. I was made redundant 7 years ago. I managed to keep paying my bills but in the end defaulted on two. I have paid one off in full and now shows as satisfied three months ago and the other is due to fall off end of this month. My question is this. I have since managed all my accounts, I have no missed payments and I am no longer in debt. However why has my credit score not Improved at all with one default dropping off, it has not moved in the last year plus? My public score however is in the excellent range. I had hoped my score would have improved at least a little.
Sara (Debt Camel) says
“However why has my credit score not Improved at all with one default dropping off” has it actually dropped off? You mentioned it has been repaid, this isn’t the same thing. When is the default date?
“My public score however is in the excellent range.” what are you looking at that shows you a “public” score and a different score as well?
Shirley says
Hi thanks for the reply. Yes the defaulted account was paid in full last August and dropped of my file in February this year and no longer shows on my report. I have another defaulted account that will drop off at the end of May. The Public report I referred to is on my credit report with checkmyfile and is the report landlords etc can check this sits in the high 980 mark and the second report with the poor score is my actual credit score that a credit card company or loan or mortgage company would look at.
Sara (Debt Camel) says
Where are you seeing this “actual credit score”?
Shirley says
I have an account with the credit company Check my File they list both scores within my File.
Sara (Debt Camel) says
OK, you can ignore what Check My File call scores on “data seen by others” – they would take no account of defaults at all.
For the other scores – if your account only shows 1 remaining debt with any problems and that will drop off at the end of this month, your score should improve next month. But what is the debt you said ” I have paid one off in full and now shows as satisfied three months ago”? is that the one that has dropped off?
Shirley says
Yes the one showing as satisfied is the defaulted account when I look at closed accounts. The default fell off the report three months ago. I just have the one default which is the six years at the end of this month. It is not quite paid off in full by nearly, another three months should clear the debt.
Scott says
Hi on my clear score credit file when I go on closed accounts I have four debts with lowell all totalling upto to around £2000 they show up as last updated in 2013 I want to go for a mortgage in the near future should I pay these debts off in monthly installments I’m unsure what to do as they are old debts I have been told that starting to pay them is worse as it shows up as a new debt and my credit score will do down and lenders ain’t so bothered about debts over 3 years old what should I do thanks
Sara (Debt Camel) says
I think closed accounts on Clear Score include those which are defaulted. If you have 4 defaulted accounts you haven’t repaid, you stand very little chance of getting a mortgage. You need to settle the accounts, not just start to repay them.
Starting to repay the debts will not show up as a new debt and your credit score will not go down.
Mortgage lenders aren’t so bothered about defaults over 3 years old IF they have been settled for more than a year. Most mortgage lenders will reject you immediately with unpaid defaults.
Scott says
Thanks for info but if I start to pay them will the 6 year window when they come off my report start again from when I start paying them , also at the moment I can’t pay them in full and they are offering a monthly payment plan
Sara (Debt Camel) says
No. I am assuming a default date has been added in 2013 – the debts will then disappear in 2019 whether you pay them or not.
If you can’t pay them in full, you could look at a full & final settlement offer? This is not an easy decision to take, see https://debtcamel.co.uk/dmp-partial-settlement/. But realistically if you can’t afford to repay them, you can’t be very close to getting the deposit for a mortgage, can you?
Scott says
Ok thanks I’m looking at a mortgage in a year or or two at which time I will have a deposit so if I pay the debt in full it will still come off in 2019 but if I choose to pay monthly then then it will start the 6 years untill the debt comes off my file all over again is this correct thanks
Sara (Debt Camel) says
The debt comes off your file if you pay it in full now, settle it partially, start monthly payments or ignore it completely.
Of course, if you ignore it, you may get a CCJ added which would be a disaster for your mortgage, but the debt itself will drop off 6 years after the default debt whatever you do.
barry weston says
hi. i have acct from june 2011 from severn trent. the debt was for £666. i was given a cci for £666 at northampton court. after moving address and finally finding out i rang northampton court to be told they weren’t dealing with it any more and it was the local court. i went to my local court and they said its now with the debtor. rang severn trent and they have sold it to another company. now the other company wants £900 in costs and fees. is the cci due to drop off my account in june weather paid or not? if nothing paid by june can i declare this statue barred?
Sara (Debt Camel) says
Hi Barry,
CCJs technically never become statute barred, but after 6 years the creditor has to go back to court to ask for permission to enforce them. It is unusual to have that much added in costs and fees… I suggest you phone National Debtline on 0808 808 4000 and talk to them about the details of your case.
barry weston says
ok, so after the 6 years and the cci drops off my file the creditor can go and apply for another cci even though its been more than 6 years?
Sara (Debt Camel) says
No, you can’t get a second CCJ for the same debt.
Maria Francesca says
Hi,
I became in arrears with a bank loan around 2008. The account was recorded as a default I believe. Since this date I have been making regular payments. I have kept to my payments and never missed a payment. The debt was passed to a credit management company back in 2008. in March 2017 I telephoned to increase my payments as I am in a better financial situation. When I have checked this month my credit score has declined significantly. I am unclear why this would be the case as this is not a new loan/default as the original default was over 9 years ago. I have actually paid the defaulted account in full today so there are no outstanding debts to this loan from 2/05/2017. Is there any reason my credit rating would decline so significantly as prior to increasing my payments I had a reasonable/fair credit rating. I don’t know what to do next or who to contact as I’m worried they have classed it as a new defaulted account.
Sara (Debt Camel) says
What does your credit record currently show for this debt?
Maria Francesca says
It is now showing as a new account and new default/arrears I think. When I phoned the credit management company in march shortly after that (2-3 days later) everything vanished from their records. Now it’s been logged as this and is back on my report.
Thanks
Lisa V says
Once you make full payments off of your debt and it is cleared from credit rating and no longer shows as a default. If you apply for a mortgage, will creditors be able to see that you once had defaults on your account or after the 6 years they completely get wiped clear and never get seen by anyone. ??
Sara (Debt Camel) says
After the six years, a mortgage lender will only be able to see an old default from their own internal records, for example if you defaulted to Barclaycard and then applied to Barclays for a mortgage.
Adrian says
I have several defaulted credit card accounts after I was out of work for a long time and then seriously ill. I have perfectly paid arrangements on all of them but they are over six years old now, and i guess, about to drop of the credit register.
Once they do, if i stop paying can the credit companies still chase me?
Sara (Debt Camel) says
Yes, see https://debtcamel.co.uk/paying-old-debt/.
Paul H says
Hi,
I have two current defaults, one for £1200 and one for £5k, would it help my credit score if I tried to pay these debts back quicker? I am currently on a DMP with Stepchange, but not being able to buy anything on HP as I pay a considerable amount on my DMP each month worries me. I am trying to look towards the future and plan for any changes.
Many Thanks
Paul
Sara (Debt Camel) says
No, repaying these two debts faster won’t improve your credit score. How much longer will your DMP last?
Paul H says
Hi Sara,
I will be on my DMP up until March 2019, I have done quite well with it to pay off £12k in two and a half years, but ideally just wanted my credit score to improve as soon as possible, without waiting until 2021, as the defaults were added late 2015.I was going to look at trying to overpay the monthly payment, do you recommend it?
Thanks
Paul
Marie says
Hey there!
Im not sure what to do. I have 5 defaults on my account. Earliest one was 2013 the rest are spread from 2014 & 2016. The balance is around 11k.
I now have the money to pay these off in full, however is it worth it do you think? I have had arrangements with debt companies to pay £10 per month each debt for the past year or so. Should I just keep doing that until they disappear from my file?
Im looking to buy a villa in Spain or here but to do that my credit rating needs to be good. So will paying these off in full now increase my chances of being approved for a mortgage this year? Or should I just not waste my money and keep saving & pay £50 per month for the next 10 years?
Sara (Debt Camel) says
Repaying these wont directly improve your credit score but until they are settled you are very unlikely to get a mortgage, see https://debtcamel.co.uk/mortgage-recent-defaults/.
jenna whitmore says
Hi Sara,
I am wondering if you can help?
I have just looked at my noddle report and i have Cabot finance listed as a default every month from Ja while ago.
This unfortunatly went through to a CCJ – at the time i didnt know this had happened as all post went to a previous address which has just been a disaster for me. I am now payin this of £10 through an attachment of earnings what i want to know is why Cabot are still listing this as default if i am paying this back through a CCJ.
Will this continue to show untill the debt is settled?
If this is the case its going to show on my credit report for many years to come.
Thanks,
Jenna
Sara (Debt Camel) says
After a debt has defaulted it will continue to be marked as in default every month until it is settled, BUT when the default is 6 years old, the whole debt will be deleted from your credit record, whether it is settled or not.
The CCJ itself will be on your file for 6 years. CCJs are much worse for your credit score than defaults, so in practice, the default on this debts isn’t that important.
annemarie says
I paid 2 defaulted debts in full (approx £500) recently and this has negatively effected my credit score. It has gone down by 6 points! will this recover? I really need to build my credit and I was hoping that this would help. The debt was from approx 8 years ago and I hadn’t made any payments for about 7 years. I have been declined for a credit card so I can’t think of any other way to improve my credit. Any advice please?
Sara (Debt Camel) says
Paying a defaulted debt in itself does not help your credit score as the above article says. But it will make some lenders more likely to give you credit.
6 points is a tiny amount, credit scores are complicated calculations, probably something else on your record caused this small drop.
If you hadn’t mad any payments for 7 years, you should ask for the default date to be backdated or for a default to be added, see https://debtcamel.co.uk/debt-default-date/
Gill says
Can you help me? I’ve never missed a loan repayment, never missed a mortgage payment in 13 years, occasionally forgot to pay a credit card in time, but last month I found my credit score was awful and it was because of a ccj that I never knew I had…turns out it was a private parking ticket which I appealed in writing and then heard nothing back from them but apparently it went to court anyway and. Jan 16….the ccj was sent to an old address in my maiden name and that’s why it wasn’t redirected to me….it’s for £170 but from what I’ve read it doesn’t matter whether i now pay it or not as my credit rating will still be affected by the ccj being there for another 5 years anyway, is that right?
Sara (Debt Camel) says
You may have good grounds for the CCJ to be “set aside”, I suggest you discuss this with National Debtline see https://debtcamel.co.uk/more-information/where-to-get-help/ for how to contact them.
If you don’t then you are right that paying the CCJ won’t improve your credit rating, but it will stop bailiffs arriving, see https://debtcamel.co.uk/debt-stop-bailiffs/.
Julie Watts says
I have finished my Dmp this year and all my debts are paid. On checking my credit report I was surprised to see a default from 2012 still showing a balance of £65. I realise this will drop off my file next year but do not understand why it still shows a balance of £65 when I made all payments required with my Debt Management plan.
All my other accounts are showing as satisfied.
Sara (Debt Camel) says
I suggest you ask your DMP firm to confirm that that debt was cleared, then go back to the creditor and ask them to mark the debt as satisfied with zero owing.
It won’t change your credit score, but it will prevent the creditor popping up in a few months and demanding you pay them or they will go to court for a CCJ.
Stewart says
Hi, I have a delinquent account showing on Experian which has not been updated since early November 2015. I have several other accounts in default; however, as they are over 6 years old they no longer show on the credit report.
I have a DMP, which is coming to an end within the next 12 months, at which point I will have no further debt.
My question is, I am expecting to come into enough money shortly to pay off the delinquent debt, if I do so, is it likely that my rating will improve? what will the status of the currently delinquent debt be once I have repaid it?
Sara (Debt Camel) says
Are the “delinquent debt” showing on Experian and the ones that have dropped off your credit record included in your DMP?
Stewart says
yes, all my debts are part of the DMP. all the others were defaulted more than 6 years ago and have now dropped off the credit report. The only one remaining on there is the delinquent account which has not been updated since 2015.
Sara (Debt Camel) says
If you pay off this non-defaulted debt it will show on your credit record as Settled with zero owing. This won’t improve your credit score immediately, although over time the arrears markers will get older and affect your score less. The debt will disappear 6 years after the settlement date.
You could ask for a default date to be added back when all the other accounts were defaulted, see https://debtcamel.co.uk/debt-default-date/
Bob says
Hi,
I am planning (as everyone else here) to get out of my DMP and pay off defaulted debt in order to get a mortgage in a years time. Change of circumstances and some unexpected help.
However, one of the debts in the DMP has not defaulted, I am assuming this is because I am meeting the minimum payments (6K credit card and dare not ask in case it is a mistake), this debt has been bought by a debt company, but all my payments are showing green ticks.
So, should I pay off this debt, or is it actually building my credit profile up? I guess there is a risk they suddenly add a default, and I would have to fight to get the default put back. They do send me periodic notices that the debt is due in full but are happy keeping the arrangement as agreed with the previous debtor.
There is also a default showing on one of the other debts probably 6 months lather than strictly should. Given that the default will be in the 2-4 year window regardless, is it even worth trying to get it adjusted?
Is it also worth paying them off in full, speaking to some of the debtors, they offered to accept a lesser amount to clear.
Thank you for taking the time to help
Sara (Debt Camel) says
If there are no arrears and no default on this debt, then it is helping your credit record. When you pay it off, it should show as zero owing and Settled (not Satisfied, that would be when there was a default.) They shouldn’t add a default date if you pay it off… and you can object if they do… but it’s really hard to know what will happen as what is happening at the moment doesn’t sound right! If I had to guess, I would say that if you pay it off in full a default is unlikely to be added.
The problem with continuing with the agreement is what if they sell the debt to someone else? Or review it and then add arrears/default? As they aren’t doing this right at the moment, it’s hard to tell what they could choose to do. If you want a mortgage, this could be nerve-wracking.
A default that is wrong by 6 months – it’s doubtful if it is worth trying to correct that but I suppose there is no harm in trying.
It’s a hard call to say whether to repay these debts in full or not, see this other post which looks at the issue: https://debtcamel.co.uk/dmp-partial-settlement/.
Bob says
Thank you for the response.
Decided to pay everything off in full – the credit score is most important.
Paddy says
Hi
Ive 2 questions i’d love your help with….
I’ve currently 5 defaulted accounts on my credit file, However one of these came from the Debt recovery company (Link) that was put in charge of my Barclaycard credit card account, however Barclaycard has the same account already defaulted on my account. Seems very unfair the same debt has got me 2 defaults. Is there anything i can do about this?
My second question, Having checked my credit file, and have noticed that Halifax has marked my (defaulted) current account as settled even though its in debt for over £6k! It defaulted 3 years ago and 1 year ago appeared as settled. On my Equifax report it states the defaulted amount however it does not include the amount in in the Total owed. Have Halifax written this debt off, surely im missing something?
Sara (Debt Camel) says
“Seems very unfair the same debt has got me 2 defaults. Is there anything i can do about this?” Barclaycard should have marked the debt as settled with zero owing – if they have, then this is normal and the second default doesn’t harm your credit score.
“Halifax has marked my (defaulted) current account as settled even though its in debt for over £6k!” No it hasn’t been written off. It has been sold to a debt collector. Check your credit records with all three CRAs, see https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to do this for free. If you can’t see an entry from a debt collector it will probably appear soon :(
Lvr82 says
Hi,
As with everyone else on here, we are all still trying dig ourselves out of a hole our youthful self’s put us in.
Anyhow…. I’ve got a ccj that will expire in January 19 for a debt I defaulted on in 2008. It’s for about 2k. Am I right in thinking that no matter what happens this will be removed from my file at this point and will never be reinstated even if the new owner of the debt tries to go back to the courts to re-enforce it. Also a new ccj can’t be issued for the same debt and all correspondence sent to an old address. Even though a simple check will give them my current address for the past 3 years.
Its the last of my debts on my file to remain unsatisfied and I’m hesitant to go chasing to pay it when they’ve not once contacted me since applying for it.
Sara (Debt Camel) says
Yes it will drop off you file and it will never reappear. And a second CCJ can’t be obtained for the same debt. Make sure you keep the CCJ paperwork for at least another 6 years though so that if the creditor does try to get a new CCJ you have the evidence to hand to prove there has already been one.
The CCJ doesn’t actually expire after 6 years, but if the creditor tries to enforce it after that contact National Debtline.
Vic says
Hi- I’ve recently been offered a new role by a none financial institution- I have been told the will do a credit check as part of the pre – employment background check. Am I correct in thinking that they will only be able to see public record info?
So, CCJ, IVA electoral role etc? Or are they able to see defaults as well?
Sara (Debt Camel) says
Most non financial employers will only do a background check that covers public information such as CCJs and IVAs as you say.
DB says
Just to say, this is the most informative blog/site for people wanting to know about defaults and other adverse credit.
My scenario is this, I have a total of 6 defaults, all relating to O2 (telecommunications).
Everyone of them has been paid and marked as satisfied/settled.
Age of defaults vary but are all over 3 years from date of default and 2 years since all settled.
All my credit cards paid off within the last 2 months and by August this year there will be my overdraft and loan which will also be paid off. I am expecting my credit score to increase based on my overall low usage of available credit limit.
I am just looking for a bit of guidance on applying for a mortgage with Halifax with telecommunication defaults over 2 years old but with a very good credit score. Am i wasting my time or is it true what is being talked about……telecommunication defaults are much more lenient or will they just be tarnished with same ‘you cant manage money’ brush on AIP stage?
Sara (Debt Camel) says
Repaying the loan and getting out of your overdraft will help a mortgage application. And with the defaults all being over three years old and settled a while ago you should have a good chance of a mortgage but go through a broker, not direct to a lender.
PS I hope you haven’t closed the credit cards. Leave them open. And use one every month and repay it in full every month is the best way to improve your credit score.
Paul says
Hi,
I mentioned before that I have two outstanding defaults, and I am currently on a DMP.Is it advisable to overpay the defaults to try and settle these as quickly as possible? Is it also advisable to take out a pre-approved credit builder credit card to try and rebuild some credit, by spending very little on it, and repaying it immediately? The problem I have is that the defaults have been on my credit file for almost 2 years,but I have a very poor credit rating and cannot buy anything which would cost more than any available savings? For example,a television?
Sara (Debt Camel) says
Repaying the defaults won’t actually improve your creditor score, but it is likely to make it easier for other people to lend to you.
You said you were paying a lot to your DMP. So how realistic is it to increase this? How much extra could you pay a month?
A credit builder card is not going to help your creditor score whilst you are in a DMP! It would be a waste of money
Paul says
Hi Sara,
The DMP was originally £334 a month for the first year, I then increased it to £443 a month,the only problem I have is that I currently have two defaults,one of which is just over £1000,but the other one is £4400.I can pay additional on top but I don’t really want to commit to paying extra as I will have to pay this every month which I may not always be able to.But being unavailable to get anything on credit is causing me a few problems in buying anything in the future?
Sara (Debt Camel) says
Yes, you don’t really want to push your monthly payments up to a level you can’t make every month. Especially as your DMP isn’t going to last for too long anyway.
I suggest a good way forward is for you to save up the “extra” amounts you have some months. Then you can use those to buy a TV or whatever – avoiding any need for credit.
Paul Hedge says
Yeah I totally understand,it’s just for the urgent things that you need quickly which are more difficult.Like if anything happened to my car and needed to get a new one etc.
Sara (Debt Camel) says
There isn’t an answer to that. You could stop paying your DMP at all for a couple of months, but it’s still not instant money. But there are no ways that will rapidly improve your credit score.
Chloe McCreadie says
Hi there, this site so helpful thank you so much. I have a debt with a default date of 6th July 2011. The default balance is £1700, but the full amount is approx £4K. I’ve been offered a partial settlement of approx £3k.
I’m in the process of trying to get a mortgage, I’m really lucky to have a large deposit (from my parents). At the moment my salary is very low so I just pay about £5 per month towards the debt. My parents have offered to clear the debt either fully or partially if it will help me get a mortgage.
As this is about to drop off my credit file should I bother with the partial/settlement? Should I just continue with the low payments to avoid a ccj?
My parents have worked so hard for their money and I’m extremely grateful for their help, I want to put their money to the best possible use.
Thanks in advance for your reply x
Sara (Debt Camel) says
You have to clear this debt, fully or partially before applying for a mortgage. In your situation I would recommend partially as it’s just about to go from your record, see https://debtcamel.co.uk/dmp-partial-settlement/ for details.
The debt collector may well accept £2000 if you explain its being offered by your parents.
Can I just check that you are sure you can afford a mortgage if you are on a low income? Owning a house comes with al sorts of extra costs that you don’t get if you are renting… also are you sure you parents really don’t need the money?
Paul Hedge says
Can I just ask a question with regards to full and partial settlements? Will there be any difference to my credit file in regards to a defaulted account? I’ve got two defaulted accounts and I just wondered if they have a different effect on your credit file if you make a partial settlement?
Sara (Debt Camel) says
A partial settlement is a flag on the debt record. It doesn’t affect your credit score. Some lenders take account of these flags, many do not.
Paul Hedge says
Thanks again for your advice,much appreciated
Chloe McCreadie says
Thanks for your reply. Why does the debt need to be cleared before applying for a mortgage? I know I have to continue repaying it but as it will drop from the credit file very soon why does it need to be fully/partially cleared?
I’m applying for the mortgage in just my name as my husband is a student, so the loan repayments can come from his account so they won’t show up on my outgoings when I submit my bank statements.
I’m aiming for a house worth approx £130k with a £100k deposit, my rent is currently £550 which I’ve paid every month no problem, so I can definitely afford a £30k mortgage.
Thanks so much for your continuing help.
Sara (Debt Camel) says
You are likely to be asked about your debts and repayments as part of the mortgage application. It’s fraud to not mention one, even if it isn’t on your credit record and it isn’t showing on your bank statements.
But with a deposit that big, it’s an easy decision – just settle the debt!
Chloe McCreadie says
I understand why I have to keep repaying the debt, and acknowledge it in a mortgage application, but I still don’t understand why the debt needs to be partially/fully cleared before making the application? I’d rather continue to pay back the debt myself rather than using the deposit money from my parents.
Sara (Debt Camel) says
Because most mortgage lenders would rather offer a mortgage to someone who has resolved their debt problems. Your current debt collector may be perfectly happy getting £15 a month – but it could be sold to a debt collector who wants more. Or who sees you have a house, they may decide to go to court for a CCJ and get a charge on your house…
You will have a huge deposit. It may be there is a mortgage lender who won’t care in that situation, you could go to a broker and ask. I am just saying what lenders normally do.
Chloe McCreadie says
Ah ok I see what you’re saying. Thanks for such a prompt reply I really appreciate it x
Chloe McCreadie says
Hi again, so my debt has now gone from my credit file but has also been passed to a different company, they’ve said they’ll do a partial settlement but have asked me to make them an offer first, (they suggested a reduction of £300 at first) so what’s the best I can offer? The debt is £4843, the previous company offered a reduction of 40%, can I offer an even lower deal so you think? Thanks in advance for your help x
Sara (Debt Camel) says
CAn you give some details about this debt? Was it originally a loan, a credit card, an overdraft or what? When was the account opened?
Chloe McCreadie says
It was originally a loan opened in 2007 from HSBC for about £8k, I was making regular payments for a few years then when I was between jobs I arranged to take a payment break, when I got a new job I tried to contact them to continue making payments but couldn’t get through, and because I was young and stupid I didn’t pursue it and it took years for the company to contact me. The default date was 2011 which is why it’s now left my credit file.
Sara (Debt Camel) says
When did you last make a payment?
Chloe McCreadie says
Last month for £1, that’s been the arrangement for about 8/9 months as I was out of work, I have had a job since January but knew I would be trying to get a mortgage so have been paying off credit cards etc.
Chloe McCreadie says
So do you think a 40% reduction is the best I can offer?
Sara (Debt Camel) says
You can offer what you want, but it’s always hard to tell what may be accepted. Have you asked the debt collector to produce the CCA agreement for the debt? If they can’t the debt is unenforceable in court and it may be much easier to get them to accept a very low offer. more info and template letters here: https://www.nationaldebtline.org/EW/factsheets/Pages/getting-information/credit-agreement-advice.aspx
barry weston says
So it’s past 6 years for the date of my un settled ccj 17.6.11. When will this drop off my file?
Sara (Debt Camel) says
Are you looking at a “free” credit record report? If you are, most of them are snapshots taken every 30 days. The CCJ may well have gone already…
Andrew scott says
I have £1000 default balance with Vodafone. Is there any way they can take the default off my credit file if I repay it? Also is it true that debt get written off if it is not paid in 4 years? If so whats the point in paying Vodafone back if I already have a default that takes 6 years to go away.
Sara (Debt Camel) says
“I have £1000 default balance with Vodafone. Is there any way they can take the default off my credit file if I repay it?” Well they could do but it’s highly unlikely.
“Also is it true that debt get written off if it is not paid in 4 years?” No, that is nonsense. Debts get statute barred after 6 years, but a creditor is likely to have gone to court for a CCJ before that point. There were 300,000 CCJs in the first three months of 2017…
“whats the point in paying Vodafone back if I already have a default that takes 6 years to go away.” Because if you don’t they will sell the debt to a debt collector who will take you to court in a few years for a CCJ, wrecking your credit record for another 6 years. And if you want a mortgage or a remortgage, you need to have settled defaults, not just ignored them.
Andrew scott says
Ok thanks. Can company’s take defaults off at their own will?
Sara (Debt Camel) says
Well they have control over the data so it’s possible. But there needs to be a reason why they should think that a default shouldn’t have been added. They aren’t going to agree to do this if you offer to pay the debt!
Lauren says
My boyfriend and I want a Help to buy mortgage. Although, he has ran into a few credit score issues on the way. His score is not rising and should be at 760 in the next month (not looking to buy next month, but it’s going up). We were told that a note saying he used a DMP is all that’s impacting us getting help to buy now…
Can these be removed? The note is truthful, can we negotiate with the creditor?
Sara (Debt Camel) says
Is he still in a DMP? If not, when were the loans settled?
Lauren says
He is not still in a DMP. The loans were paid off in April 2016.
Sara (Debt Camel) says
Are you talking to a broker? I would have thought that with your DMP having finished over a year ago he would be OK for a mortgage.
Lauren says
The broker originally said we couldn’t get a help to buy mortgage until the DMP had been paid off for 3 years.
Sara (Debt Camel) says
Try another broker.
Lauren says
Thank you. we shall try :)
Jeff says
I have 3 defaults all of which will fall off in 2018.
I have a payment arrangement with all of these lenders. My question is if I continue to make the agreed payment until they fall off my credit report then stop making payments what happens then?
Sara (Debt Camel) says
This article https://debtcamel.co.uk/paying-old-debt/ looks at your situation.
Dan says
Hello,
I had an account default with Halifax (mid-2013). This was then sold on to Lowell which I settled at the end of 2015. Is it correct that both should show as default accounts on my credit report? As in, it shows as having 2 default accounts, 1 for Halifax and 1 for Lowell, whereas technically it is only 1 account.
Many thanks
Sara (Debt Camel) says
That’s normal. When the account was sold on. the balance would have been set to zero. It is only counted as one default on your credit score.
Dan says
That is good news! Thanks for your help.
Ashley says
A few years ago being young and stupid i got myself into quite a lot of debt (12k) i took a loan out for that amount to have one payment every month going out. A couple of months later i lost my job, and stupidly never really got around to paying it back. Fast forward a few years, I’ve got a young family, where everything’s paid on time. I don’t get into any debt, only a credit card which is cleared every month to boost my score.
My parents have offered to put down a deposit on a house for me. If i check my credit history on Equifax and Experian it comes up as excellent as it doesn’t show the debt, but however if i check it on noddle/clearscore it shows that i defaulted oct 2011 and isn’t satisfied, though its due to go statute barred in September/October time
The house i want to buy is off my grandad so urgency’s the key here as he cant wait much longer. I can afford the mortgage repayments as they’ll be low and ill have a bit spare to pay off the debt over time.
Whats my best play here?? Even though it doesn’t show on the main 2 credit agency’s, am i best to apply for a mortgage with one that doesn’t use Clearscore, and then if/when they do catch up with me worry about it then?? They haven’t tried to contact me at all in the past few years, and i think they’ve got my exes parents house as the address the debt is registered to.
Thank you for your help in advance
Ash
Sara (Debt Camel) says
Most mortgage companies will check all three credit reference agencies. The debt will disappear in Oct 2017 so that’s not that long to wait, would your granddad mind a completion in late November/ early December?
David Taylor says
Hi I got defaulted on 23/03/2011, I have been making a token payment of £1 a month organised through citizens advice as the bank rejected my £120 a month proposal. For some reason creditors are still seeing the default on my account, do I have to apply to get it removed of my credit file?
Sara (Debt Camel) says
It sounds like a default date either hasn’t been added to your credit records or it isn’t correct. Check all 3 credit reference agencies https://debtcamel.co.uk/best-way-to-check-credit-score/ and read https://debtcamel.co.uk/debt-default-date/ for what to do.
Philippa says
Hi I have a default on my credit report from Lowell, the original default date was October 2012, I have been making payments every month via direct debit to pay of the debt but my credit report shows as defaulting every month, shouldn’t this show that I am up to date with payments and then the default will be removed from my account in 2018? Or does this mean that the once the debt is settled the final payment date will be the new default and this will stay on my account for another 6 years?
Sara (Debt Camel) says
Once a default had been added, your account will always be marked as in default each month. That’s the way it works. But the only default that matters is the first one. The record will drop off your credit report in October 2018.
Philippa says
Thank you so much for clearing this up for me. So in October 2018 when the default will no longer show on my account but I am still making payments what should show on my credit report each month for the Lowel account?
John Allen says
Hi,
I owed money to British Gas, which was chased via a debt collector “Wescot”. The amount outstanding was £418, but I was offered a “Settlement offer” of £292.60 which I paid on the same day (07/02/2016). The following month the account appeared as a “DF” (default) on my credit record and still exists on their today. Is that legal?
Sara (Debt Camel) says
You could complain that it is unfair to add a default after it was settled, but technically it probably is correct.
Mika says
Hi, I’d like to know if I should pay off a debt that will be off my credit report in December 2017. I’m applying for a mortgage.
Sara (Debt Camel) says
Are you making any payments to this debt at the moment?