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.
Sara (Debt Camel) says
What was the default date on the debt that us now closed? What is the default date on the debt you are currently paying off?
Shirley says
The default date for the first one was February 2011 and the second May 2011. This still has a few payments after the May 17 drop off which I will continue to make. Will this still show on my file as a default while I continue to make those payments?
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.
Scott says
Thanks for the info my main concern was that if I pay monthly it will start the 6 years over again so I am going to set up a payment plan to pay them off as quickly as I can to avoid a ccj and as they are due to come off in 2019 I’m probably better off waiting untill then to get a mortgage even if I’ve paid them off
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
Sam clay says
Hi,
Looking for some help please.
My partner has 3 defaults listed against him, a combined total of approximately 2k. One is from 2010,one from 2009 and the other April 2012. The first 2 are still shown on his credit file, should they have dropped off now and is there a way to have them removed? The third will be six years old next April. We want to apply for a mortgage, is it in our interest to pay these off inclusive of the first 2 or should we just ignore with the view that they will be dropping off apparently next year? I hope this makes sense and would appreciate any help please.
Many Thanks in advance
Sara (Debt Camel) says
Are you sure those first 2 are defaults, not just missed payments or arrears?
Sam clay says
Hi,
Thank you for responding, much appreciated.
As they are my partners, I’m really not sure I thought as they were so old they became defaults.. I’m clearly wrong. I believe they are just debts that weren’t paid at the time, I know one was handed to a debt collection agency known as Cap quest? Is this more of a problem than initially thought.
Thanks again for your help
Sara (Debt Camel) says
he needs to look at his credit record in detail and find what it says – not much point in guessing!
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/