Ms F asked:
“I have been in debt management for five years after my marriage breakdown. After an inheritance, I want to pay off my DMP as it will carry on for years. I could pay in full but my house needs some urgent work and my car is on its last legs.
I asked about my credit score if I offer a partial settlement and was told this would show as partially settled on credit score file. Will I still be classed as a risk for years to come? For my credit rating would it be best to pay in full?
I want to move house in a couple of years and am wondering if a partial settlement will stop me.”
It sounds like a simple question, but the answer isn’t straightforward as debts in a Debt Management Plan (DMP) can be marked in different ways on your credit records.
So you need to check your credit records with all three credit reference agencies and see how each debt has been marked.
What should have happened in this case?
Debts should be marked as defaulted when you are between three and six months in arrears.
Ms F’s DMP has a long way to go. So her monthly payments are probably quite low. And her debts should probably have been defaulted in the first year of your DMP.
Does this apply to you?
In that case, if you settle the debts partially now, they will all drop off six years after the default. After that, a mortgage lender will never know you had a DMP at all.
One big exception – a mortgage lender can see their own internal records which may go more than six years. So they can still see old problems with the debt they gave even when they aren’t on your credit reports any more.
If your credit record has debts with a much later default date, you can ask for this to be corrected. This also applies if the debts aren’t marked at all as defaulted at all – then you can ask for a default to be added which will mean your credit record becomes “clean” sooner. See What should the default date for a debt be? for more details, including template letters for you to use to get this corrected.
What if your DMP was more recent?
If your debt management only started two years ago, the decision would be harder. Then defaults will still be showing in a couple of years time when you may want to move house – and so will the fact that you made a partial settlement.
Some banks will not consider you if you have any defaults, especially for their best deals. Others will consider you with some defaults, for example if the defaults are over three years old and have also been settled for more than a year before you apply.
This is definitely a situation in which it’s a good idea to talk to mortgage broker about who to apply to as they should know who will and won’t consider you.
There isn’t a “right” answer here as it will depend on your particular situation:
- if you can’t repay your debts in full, I would say it’s generally better to go for partial settlements now, rather than to prolong the DMP until the debts can be repaid in full;
- your creditors may not accept a low full and final settlement offer after only a couple of years. You may decide that there isn’t any point in getting a partial settlement marker on your file if it’s not going to save you much money;
- if you are not short of money so you could repay the debts now, be able to afford the deposit for your next house and you want to move soon, then full payment is the sensible option.
If you want to make a partial settlement offer, read my Guide to Full & Final Settlement offers first.
What if the debts have already dropped off your credit record?
They will not reappear on your credit record whatever happens. Only the creditor will know whether you settled these partially or in full.
Debt collectors prefer you to pay in full but many lenders don’t care!
Debt collectors will often accept a settlement offer – they may have paid very little when they bought your debt. But they would prefer you to pay the whole amount…
So you can sometimes be given unhelpful and even misleading explanations of how a partial settlement will affect your credit record.
Ms F was told the partial settlement will show on her credit record. That’s true. But she wasn’t told that:
- many lenders will ignore this partial settlement flag. They will just be happy you have one less debt that you still owe;
- the partial settlement will only show on your credit record for 6 years if the debt isn’t defauled;
- if the debt is defaulted, it will drop off your credit record 6 years after the default date. Partial settlement does not change this. So it may vanish quite soon!
- if a debt has already dropped off your credit record, it will not reappear if you settle it with a full and final settlement.
Does credit improve when a DMP ends?
Getting car finance after partial settlements
Can mortgage lenders see my old debts?
Hershies says
I have an overdraft of 2500 defaulted in july 2016 and paying monthly min payment a debt collector still. I have a steady income now and planning to apply for a mortgage as the rest of my credit report is fair. Do you think its a good idea to partially settle this debt by offering anything between 10 to 30% now even though it comes off my credit file in july 2022. Also can i get a mortgage after 3 to 6 months of partially settling this debt as my default is almost 5 year old by that time. I need advice please whether partially settling a overdraft debt in fifth year of default do i still have to wait for an year to apply for the mortgage given i have improved my finances now or can i apply for mortgage immediately after partially settling this debt? thank you
Sara (Debt Camel) says
Is there a default date on your credit record, so this is being marked as in default every month? Or just in arrears?
Hershies says
I have verified in credit karma the date of default is showing as 28th July 2016 and it is marked in D until this September. But in clearscore it is showing the account in default with only last updated date this October and no data mark every month. Thank you
Sara (Debt Camel) says
ok, go back and look at the statutory credit reports for Experian, Equifax and TransUnion. See https://debtcamel.co.uk/best-way-to-check-credit-score/. Those reports are often simpler to read.
Hershies says
Hi Sara,
I have just verified Equifax statutory report and can see the current account is defaulted July-2016 and account settled in August 2016. The same current account is shown with PRA group with default on July 2016 and no markers shown(payment frequency is shown as ‘0’ even though i am paying a set amount to them every month). But the last updated date 4th of this month. So at least the default is there showing July 2016. If i partially settle this now by offering anything between 10 to 30% is it a good idea and does it make difference to any mortgage application that I am planning to in the the next 6 to 8 months? thank you
Sara (Debt Camel) says
If you settle a defaulted debt now, it will still make it very hard to get a moartgage application in the next 6-8 months. Most lenders preder you to have settled problems at least a year before.
It is hard to generalise about whether mortgage lenders will care about a partial settlement. Some may. Some may not. Go through a good broker, don’t just apply direct to a high street lender.
Bob says
For default debt that no longer show on credit file reports. If I arranged a partial payment, will it show on the credit file or is it a case the it has been delisted and will remain as such?
Sara (Debt Camel) says
A debt which dropped off as the default date was more than 6 years ago will NOT reappear if you partially settle it.
If it is a credit card, catalogue or loan, read https://debtcamel.co.uk/settlements-old-debts-cca/ and think if this is worth trying before you offer a settlement.
Ash says
Hi Sara,
4yrs ago I had 6 defaults registered (loans and cards). At the time I had started a DMP. I managed to clear all my debts with partial settlements (by selling my flat).
Since then I have had no debt, with 2yrs to go until the defaults drop off my credit file.
Now I live with my partner who has a mortgaged home (I am not on the mortgage, for these reasons).
We would like to do some home improvements using savings plus a loan. I have a decent f/t salaried income (my partner now only has a small self-employed income).
An eligibility check with Zopa reported that I am ‘pre-approved‘. I am wondering if it would be worth applying given my credit history, i.e., is this likely to be giving ‘false‘ hope and will a full credit search simply identify the defaults and lead to a swift decline?
I realise that you/we cannot pre-empt lenders’ assessment algorithms but is my interest in this type of credit simply premature?
Thanks in anticipation,
Ash
Sara (Debt Camel) says
Well there is no harm in trying, one decline isn’t a major problem.
BUT their interest rates can be pretty horrific. What have they offered you? And this sort of lender has a reputation for being unpleasant and aggressive if you have financial difficulty. You could be a lot better off if you save up for a couple more years then get a loan at a much better rate.
Ash says
It fits with our circumstances to do the works now. Borrowing now is about cash flow – making up 20% of our total works budget.
The rate is 14% which is horrid but perhaps realistic? In any case, we plan to and will have means to overpay and clear early. Is it correct that that could significantly reduce the total interest paid?
Sara (Debt Camel) says
Overpaying will reduce the interest less than you would expect.
Ash says
So if it was a 60month agreement for say 20k and we were able to clear it in 36months instead, what level of overall interest reduction might we hypothetically achieve – at least in terms of ‘low/medium/high‘…?
Sara (Debt Camel) says
Using the MSE overpayment calculator (https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/) which I would expect to be a reasonable approximation:
20k at 13% for 5 years is a monthly repayment of £455. You would repay £27,302 so £14,302 in interest.
If you pay an extra £230 a month, so £685 a month right from the start, you would repay the loan in 3 years and you would have paid £24,172 so £11,172 in interest.
But if you could save up £685 a month, then you would have saved up all £13,000 in just 19 months. No interest paid at all. No risk of a damaged credit score of things go wrong.
Ash says
Thanks Sara for your ever helpful insights and tools.
Mike W says
Hi Sara,
I’ve used debtcamel so much over the years and your articles and knowledge has been so helpful in cleaning up my credit. So thanks, firstly!
I’m soon to be in the position of having a default-free credit report with one exception…
I had a T-Mobile account that was sold to a collections agency (lowell). T-mobile never reported my account to any credit agency. Lowell, however did. The debt is settled and 6 years up at the end of 2021. Ideally I want a mortgage before then though!
My question is, are collections agencies allowed to report defaults when the original creditor didn’t?
Thanks,
Mike
Sara (Debt Camel) says
yes.
Have you repaid this?
how long was it with T mobile when you weren’t paying it before it was sold to lowell?
Mike W says
I made partial settlement 2 years ago.
I do not know how long it was with T-Mobile before it was sold. The first credit records for Lowell start on 03/2017. The default date is 10/2015….this is probably accurate as I stopped paying T-Mobile around 04/2015.
Sara (Debt Camel) says
So the default date is 6 months after you stopped paying, which is correct.
But as the default was settled 2 years ago, you should be OK to get a mortgage now though i- how large a deposit do you have?
Mike W says
About £70k deposit. Job promotion and getting on top of bad habits allowed me to save this.
I’m unsure how the default will affect mortgage rates though.
Thanks again for your reply
Sara (Debt Camel) says
I meant as a percentage deposit.
Well done for workjing your way out of this.
Mike W says
So that would be about 35-40% as I live up north.
Sara (Debt Camel) says
Then I hope you can get a mortgage from a high street bank at a reasonable rate. Talk to a good broker, don’t apply direct to a bank.
Niall says
Hi. Can someone please also help me. I have a old overdraft too worth £670. I pay £20 a month to settle this payment. They’ve offered me a settlement figure of £500. Is it advisable to settle with that payment even though it’s a partial settlement or continue to pay the small payment for year’s?
Thankyou
Sara (Debt Camel) says
Can you afford £500?
Are you trying to get a mortgage now or soon?
Does this debt show on your credit record with a default date?
Abbie says
Hi Sarah,
I wondered if you could please clarify something. I have a debt that defaulted in September 2015. I called them today to see if we could agree a settlement offer. I was told that once the settlement is paid in total, it will show on my credit report as partially settled (I was already aware of this). She went on to say that the partially settled status will appear on my credit report for 6 years from the date of payment. I was under the impression that if the debt is defaulted, it will drop off my credit record 6 years after the default date and that partial settlement does not change this. I mentioned this and the call handler said this was not the case and that the partial settlement will drop off in 2027, not September 2021.
Weatherman says
Hi Abbie,
The simple answer is you’re right, and the creditor is wrong. But it’s quite a common mistake for them to make. (They can’t control what goes on with the credit report, so it doesn’t really matter that they’re wrong!) Whether or not you agree a settlement, it’ll stop being on your credit report six years after the default date.
It might also be worth noting that because this debt previously defaulted, it would actually be marked on the credit report as ‘partially satisfied’ rather than ‘partially settled’ – just in case you later see this on your credit report and wonder what they mean!
Andy says
Hello Again Sara,
I terms of Partial Settlement I’m reading mixed results.
Me: I have a old Capital One account which was defaulted in April 2017 following 6 months missed payments. The account remains open on my credit file affecting the current level of debt outstanding and credit utilization. I have contacted them to asked about showing closing and was told it would stay open until the default falls off.
They have offered me 50% final settlement, which would show partially settled but was advised this would help my credit score.
Would it help paying and if so to much affect.
Many Thanks
Andy
P.S Your should consider setting up a “buy-me-coffee” page. You help greatly.
Sara (Debt Camel) says
what are your other debts like? Do you have others which defaulted back in 2017? Other debts that havent defaulted where you are paying interest? Do you actually have the money for a F&F in your bank account, if not where would it come from?
Andy says
Thank you for reply,
The debts I had all was dealt with CAB (who was great) at the time was BrightHouse and logbook loans. Them companies just closed the accounts however Capital One said interest would be frozen, would not chase but however not close the account.
Its worth noting these high interest creditors were clearly stating that I needed to ask friends family for money, along with getting other loans and was said directly to CAB officer and was highlighted calls are recorded and against FCA rules it was decided to just close the account at that point without reaching default. I feel lucky looking back.
Capital is the only account still flagging and able to meet the amount they offered.
Sara (Debt Camel) says
So if there is a partial settlement, the balance should be changed to zero and it will show as “partially satisfied”. It will still drop off in 2023 after 6 years.
This won’t help your credit score. But it may make other lenders more prepared to lend to you as they can see you no longer have that problem debt.
Laur says
I have 3 debts – 2 credit cards 6k each and a personal loan 10k.
One card has defaulted (amex) and they offered a partial settlement of 50%
The other card (barclays) offered a repayment solution – £50 a month for a year and then resume my minimum payments of £150 a month.
The 10k loan are only happy to take payments to clear the arrears “2k” and make minimum payments again. This is £300 a month as min payments were £200
The reason for debt was living on credit and struggling to make min payments last year. Earnings are 1600 a month. rent and bills are 800 and others eg car/phone are 150. The min payments were 600.
I am planning on moving in with my partner soon which will save me a lot of money.
Should I consider the partial settlement as that account has already defaulted? Will the default/settlement hinder my chances on getting a mortgage in a few years?
The loan have issued a default notice so I need to make a decision soon on paying their payments to avoid that. If they defaulted me then I would have 2 defaults to contend with for future credit.
Would you advise a DMP to encompass all of them? I was told that means automatic default though?
My other thought was a DRO (if/when they up the threshold to 30k to cover my 22k debt) But that will I imagine be a lot worse for credit/possible mortgages than defaults?
Thank you
Weatherman says
Hi Laur
The honest answer is that any default on your credit report will frighten mortgage lenders, and will stay on for six years even if you agree a settlement. So the added ‘badness’ of a DRO will probably be quite small – plus the debts themselves will be gone.
One other thing to remember is that you won’t be able to get a DRO if you’ve made a ‘preferential payment’ to any creditor in the last two years. Agreeing a full & final settlement with a creditor might well count as this, so before you agree that, think carefully about whether you actually want a DRO instead.
You’ve got a few different directions you could go in; I would speak to National Debtline on 0808 808 4000 who can go through each of your options in more detail, and then you can decide what’s best for you.
Laur says
Hi Weatherman, Thank you for your advice.
I think you’re right…I’m just trying to weigh up what looks worse for potential lenders in the future, rather than what is best for me now.
Just wondering in terms of defaults dropping off after the 6 years…does this date still stand if I opt for a DRO at a later date or does the DRO start the clock again on the defaulted account?
Thank you again.
Laur
Weatherman says
Hi Laur
No problem at all :)
The default will always drop off after 6 years. If a creditor gets a CCJ, that puts a new marker on that lasts for 6 years. The DRO would also put a new marker on, which would also last for 6 years.
Even after the default drops off your credit report, mortgage lenders often ask about *any* debts that you have, and you have to tell them, even if they no longer show on your credit report. So it’s best to deal with them one way or the other, whether that’s through a DMP, a DRO, or a full and final settlement, etc.
Sara (Debt Camel) says
Mortgage lenders also usually ask for bank statements, so they can see if you are still paying debts in a DMP even when they are not on your credit record.
I too think it would help you to talk to a debt adviser like national Debtline about your whole situation. Getting some ideas from here about what might be possible is good, but it needs someone to help you look at your income and expenditure to really talk through how long it would take you to clear debts in a DMP, even with some settlements – and whether you might qualify for a DRO if they increase the limit in the next few months.
Danny says
Hi,
I decided to go into dmp back in 2019.
Once I set this up 4 of my six accounts when into default.
I was under the impression that all do my creditors would of defaulted in the same year meaning I would potentially have a clean credit file in 2025.
Ive just looked at my credit report and noticed that two of my accounts, Aqua and HSBC are still active. I mentioned this to a family member who said they would pay off the balance of these two cards, as in 2025 I was hoping to start look into mortgages with my partner.
If the accounts are still active would offering a partial settlement be wise or should I just pay off the full amount?
Sara (Debt Camel) says
As the article above says, it is hard to tell if partial settlement will make any difference. If the debts are repaid now, then come 2025 if you have a good deposit you should be in a good position to get a mortgage. 4 of the defaults will be gone and the payment arrangements on the other two will be 4 years in the past.
Rebbecca says
Hi wondering if you could help me I have a debt of £776 from 2018 but with legal fees it’s gone up to £996 they have have offered me partial settlement of £609 but looking to buy my first home in around 18 months would I be best just to pay on full or take the settlement
Weatherman says
Hi Rebecca
If the debt shows on your credit report, then the settlement would show as partially settled, which is less good than if you’ve settled it in full. But taking the settlement might still be a good option for you.
Whether it’s a good idea to take the settlement depends a lot on the rest of your situation – take a look at the info here: https://debtcamel.co.uk/ff-credit-record/
Sara (Debt Camel) says
As Weatherman says, partial settlement will show on your credit record. But do lenders care? or will they just be happy the debt is settled? It’s hard to weigh up £390 extra in your pocket against the unknown about whether a mortgage lender will care. See https://debtcamel.co.uk/dmp-partial-settlement/ which looks at this.
One thing, I always suggest people apply for a mortgage through a broker. Don’t go direct to a lender, brokers really can help pick a lender who is more likely to accept an application.
Louise says
Hello Sara/everyone
I am currently in a self managed DMP, everything defaulted a couple of years ago so I’m at the stage now where I’m just waiting for the defaults to drop off whilst making monthly payments. I have accepted the fact that I won’t be getting a mortgage for now! However I would like one in a few years time.
One of my debts was a loan with Zopa which defaulted about two years ago and then last month was sold to Cabot. I switched my monthly payment to Cabot and thought nothing more of it but today the ‘new’ loan has appeared on my credit file. Will the Cabot loan disappear six years after the date the Zopa loan defaulted?
Sara (Debt Camel) says
The Cabot credit record should have the same default date as the Zopa one had. Check this!
If it does, then the Cabot record will drop off at the same time the Zopa one does.
But will your debts be cleared by the time they drop off your credit record?
Louise says
Hi Sara
Thanks for your reply, apologies I didn’t see it before.
Not sure of the default date with Cabot yet as it currently says the loan will be added to next month’s credit report. So I’ll be sure to check then.
I hope my debts will be paid off by the time the defaults drop off. That’s the plan.
Over the past two years I have gone from 9 creditors to 5. And the debt amount has gone from about £38,000 to about £19,000. That’s from a combination of having some debt written off, plus paying it off (mainly paying off). So feeling confident I can do this!
Sara (Debt Camel) says
it’s good to have a plan!
You may be able to speed up paying the debts off (bit not getting them off your credit record) with partial settlements. And if some of the account have been sold to a debt collector it may also be worth asking the debt collector to produce the CCA agreement for the debt, see https://debtcamel.co.uk/ask-cca-agreement-for-debt/
jacqui says
Hi Sarah My son is currently bankrupt, ironically through no fault of his own. A pension provider assumed there was an overpayment of benefit. After a long investigation with all benefits halted they decided there was no case to answer. In the meantime my son had racked up debts trying to live. A large back payment has come in which the receiver wants ‘urgently’ However they have cited their fees approaching 12k which will be paid from this lump sum before they even begin to pay off creditors. The whole situation awful and unfair from start to finish. Whilst I paid his bankruptcy fee, why is the receiver demanding such a huge additional fee? Nothing has ever been provided in writing about this. People should be warned about applying for bankruptcy when any debt is loaded with even more. Can you explain please?
Sara (Debt Camel) says
The Insolvency Service costs of administering bankruptcy are larger than the fee paid on the bankruptcy application and they are entitled to recover them if the person who went bankrupt has assets or received a large lump sum payment.
How large were the debts going into his bankruptcy? Did he take debt advice before going bankrupt? how large is this lump sum he has received?
jacqui says
No he did not take debt advice before declaring bankruptcy . His credit cards debts were close to 30k. He has no assets, still living at home.
However his payout from the pension provider was close to 20k which he has now paid back to the insolvency company. This still leaves a substantial sum to be repaid.
He is still hoping that in due course he will be able to annul the bankruptcy. I believe the there is a time limit on this. The ombudsman will be examining the case , but this is likely to take many months before they even get to it. It would appear his option with this level of debt were few, at the time he was unemployed, but since has found a good position.
Sara (Debt Camel) says
I am sorry but he would have had other options and it was not sensible to walk into bankruptcy without exploring them.
I suggest he talks now to a debt adviser now about his options – phone National Debtline on 0808 808 4000.
The costs of annulling a bankruptcy can be large. Unless he has just inherited a lot of money, it may be better to not go for the annulment option.
He has made one poor decision without advice – don’t let him make the same mistake again.
Arnie says
Hi, I was just wondering if you could give me a bit of advice. I am looking to get my first mortgage with my partner. However when I was younger I got a lot of payday loans out and never paid them and also had a guarentor loan which I used for a car that defaulted too with 1800 pound left to pay.
I was just wondering are these worth getting a settlement for and clearing them before applying for a mortgage? I could use this out of my savings I have saved for a deposit. I don’t want to use this money if it isn’t worth doing. Thanks in advance
Laura says
Hi Sara,
I hope you can help. I currently have default on my account from Next which defaulted in June 2018, this debt was sold to a debt management company who are also showing on my credit report and the default date is the same, my first question is do lenders see this as one default or two? As it is the same debt.
The amount owned is £1,900 which I have saved up and will be ready to pay in full at the end of March. The debt management company has suggested they could offer a settlement figure which will be marked as partially satisfied, I don’t know if this is worth doing?
I am hoping to apply for a mortgage in around 9-10 months, I wanted your advice? If I pay off the debt in full at the end of the month, do lenders only consider if the default has been fully satisfied for a year or more ? Also would you advise it is better to pay it in full rather than partially satisfied?
Sara (Debt Camel) says
do lenders see this as one default or two?
as one
how low is the settlement amount offered?
If I pay off the debt in full at the end of the month, do lenders only consider if the default has been fully satisfied for a year or more ?
That is a rule of thumb – you would have to talk to a mortgage broker about your particular application
kenneth says
I am self-employed with a relatively low income. I want to buy a shared ownership property in my name. I am 55 and could put down a £20,000 deposit. Money offered by a relative. The share I want to buy is £80,000 so I would be looking for a £60,000 mortgage. My credit card defaults total £5,000 were registered last year (when Covid hit) and I have arrangements with debt management companies in place. If I am able to agree partial settlements of the debts would I have a chance of obtaining a mortgage in the coming year?
Chris says
Hi Sara,
My and my partner have racked up over £60,000 debt on 6 credit cards. It accumulated over 10+ years due to my child’s disability which made it impossible for either of us to work. When we felt we hit the bottom, I spoke to National Debtline and they suggested to go either for bankruptcy or for some sort of debt management plan.
Both felt quite nightmarish, so we went back to our lenders. To cut the long story short, one lender has agreed to write off all of our card debt (around £15k) while two others (£5k each) have agreed to a full and final settlement at 20% of the debt.
However, our biggest lender (£30k) has not agreed to any of our offers. They informally indicated they’d be prepared to accept 50% of the total debt, provided we will have missed at least 6 payments, but this would still be way beyond what we are able to fundraise. Then the bank guy then suggested to just let the accounts default, because apparently they do not pursue debt recovery with regard to debts that have been reviewed by their Specialised Support.
Now, it sounds like a tempting option, but also one that comes with a risk of a CCJ and debt recovery. A CCJ in particular is something I am very keen to avoid at all cost, as it would complicate our legal standing in many aspects.
Sara – have you heard that debts that are marked by the lender’s Specialised Support are not pursued in court? It sounds too good to be true in our situation. Is it worth taking a risk?
Chris
Weatherman says
Hi Chris
This will vary from lender to lender – there’s certainly no law or rule that means that they can’t pursue the debt in court.
If you do decide to rely on this, you should make sure you get written confirmation from them that they do not intend to pursue the debt, or that you no longer have an obligation to pay this debt.
Do you mind me asking why bankruptcy felt so daunting for you?
Chris says
Hi Weatherman,
That’s a very good advice indeed, about asking for written confirmation. Thank you! I’ll do that next week.
Re. bankruptcy – I am a director of a limited company that I just set up for the business I’m developing. Also I intend to apply for naturalisation as a UK citizen. Bankruptcy would preclude both running a company and naturalising.
At the same time, most debt management plans (and bankruptcy, too, I believe) involve someone monitoring all the expenses, and frankly I don’t feel like explaining myself because I bought myself a cuppa at Costa’s. Hence my efforts to find a solution that would balance mine and lenders’ interests…
Sara (Debt Camel) says
this 30k debt. Are the repayments affordable now so much else has been written off?
It is VERY difficult to get large debts written off if you haven’t actually defaulted on them
Chris says
Just to help everyone here:
* HSBC quickly agreed to write off all of our debt of £17k (two cards and overdraft). They also agreed to mark all of our debt as settled on our credit files (not as defaulted). Yay!
* Barclaycard insisted on defaulting our £30k debt but confirmed that they will not issue county court proceedings, because they do not issue proceedings for default cases that have been dealt with by their Special Support team (i.e., cases of default due to unforeseen circumstances – illness, death, disability…)
* PayPal instantly agreed to write off the £5k I owed them but they also closed my account permanently. No PayPal now…
* CapitalOne (£2k) refused to co-operate altogether, only went to suspend the card and interest. I’m now gradually paying the card off.
Hope this helps.
Just don’t use standard letter templates. Write a personal letter about your individual circumstances. Attach photos, etc. It worked for us.
Sara (Debt Camel) says
Very good news for you and your family!
Terry says
Hi Sara, I have £16.5k of unsecured debts. I can get partial settlements on them for around £10.5k. All my debts have defaulted with the last default coming 2 years ago. I now have money to pay at the partial settlement rates however i also owe a family member £10k. My question to you is if i don’t pay my debts what happens after the 6 years? I live in Scotland so a court decree could be issued against me (none as yet) but from what i understand this is unlikely due to all my individual debts being under £3k. I would like to get a mortgage in the next 5 years. My partner entered into a minimal asset process (MAP) 6 months ago so she is debt free now. I would really like to pay off my family member but am i better paying off my debts first for my future mortgage prospects? When my defaults expire can a mortgage provider still see these debts?
Sara (Debt Camel) says
As you are in Scotland, I suggest you ask on this Scottish Blog page: https://www.advicescotland.com/write-offs/
RB says
Hi. Do I still need to partially settle debts, if the defaults have already disappeared from my credit report? Many thanks.
Sara (Debt Camel) says
Are you paying these debts at the moment? Do you want to get a mortgage?
RB says
Hi, yes they are on a monthly repayment agreement with each collector. I will want to apply for a new mortgage in between 1 – 3 years time. Thank you.
Sara (Debt Camel) says
Then you need them all settled. Partially settled will be fine.
if you don’t settle them, a mortgage lender will see the payments on your bank statements and know they are defaulted debts. So you want then settled at least 6 months before a mortgage application.
Also read https://debtcamel.co.uk/settlements-old-debts-cca/ as this may mean some of them do not need to be paid… it may help a lot, a little or not at all.
Thembi says
Thanks for this link and advice—very helpful. Does this apply to bank overdrafts?
Sara (Debt Camel) says
CCA agreements are not relevant for overdrafts.
RB says
Ok great. Thanks so much. It’s so good to get a straight answer! I’ve looked at the CCAs but don’t think they would apply to me as I’ve been on agreements for 6 or so years (hence the defaults dropping off). Thanks for your help.
Sara (Debt Camel) says
The debts in your DMP – were any of them credit cards or loans or catalogues which have been sold to a debt collector? Asking for a CCA for these debts may well be relevant even if you have been making payments. Read that link.
RB says
I I wasn’t actually on a DMP, just paying the minimum / affordable monthly repayment on agreement, so there is no doubt about my liability?
Sara (Debt Camel) says
It isn’t a question of your liability, asking for a CCA agreement is not you are not saying it wasn’t your debt. If a debt collector cannot produce the CCA agreement for a credit card or loan, they cannot enforce the debt in court.
It’s up to you if you want to try this.
HRB says
I have debt amounting to 15k. I had an IVA in December 2015 but this was discharged in July 17 as I couldn’t keep up the payments. I’ve looked at my credit records and most of the debt says that it is only reported until Dec 21. My partner wants to help with paying off the debt and then hopefully looking to a joint mortgage early next year. If we make offers to partially settle all the debt now is it likely we will be able to get a mortgage in the new year when the debt reports drop off in December or is there more to it than that?
Sara (Debt Camel) says
Most mortgage lenders will not lend to anyone who has had an IVA in the last 6 years, even if all the debts are settled. Only a few “bad credit” lenders will, and they will normally require a large deposit.
have you been chased by any creditors since the failure of your IVA?
HRB says
2 of the creditors have chased. As the IVA was taken out Dec 2015 does that mean it comes off my records in Dec 2021?
Sara (Debt Camel) says
yes it will.
Are all the debts in your IVA marked as defaulted on or before Dec 2015 as well?
HRB says
Yes they all say ‘defaulted 12/2015’ and ‘reported until December 2021’ on my credit report. We would like to partially settle everything and then apply for mortgage in the new year but not sure if that is the best thing to do.
HRB says
2 of the creditors have chased and I want to get everything settled. Can I partially settle all accounts and then get a mortgage in the new year when the IVA no longer shows on my record?
Sara (Debt Camel) says
You have three potential problems with this.
– Getting the creditors to agree to accept your offer – that may depend how large it is.
– A mortgage lender will typically look at 6 months of bank statements – the payments to settle the debts will show at that time and you may be asked about them. Most mortgage lender want you to have settled defaulted debts at least a year before the mortgage application.
– It is common to be asked on a mortgage application if you have ever been insolvent – you have to reply yes because of the IVA. As your IVA failed, it may be you have to go to bad credit lender.
I think you should speak to a broker about your situation.
Thembi says
Hi Sara,
Great site, so helpful—thank you. I am on the same boat as RB and I just want to make sure that partially settling won’t reappear on my credit file—all my debts were at one time or another defaulted over 6 years ago so they’re ‘invisible’ in that respect but not good for lenders and mortgages.
I also want to bye a car, which would you say affects my credit/affordability score more, overdraft or the monies owed to debt collectors. Indeed all will need to be cleared for a mortgage but I wonder how much of it needs to be to get a car lease agreement.
Sara (Debt Camel) says
Partially settled debts do NOT reappear on your credit record if they have already dropped off.
What is your credit score at the moment?
Thembi says
Hi Sara,
it’s 890 on Experian however 514 on clear score and an affordability rating of 2/100. I’m not sure if it’s my overdraft (which I use to the full £2000 limit every month) or the payments to creditors that are lowering it the most. Of course all debt will need to be cleared but I do need a vehicle soon (enable me to move somewhere cheaper to pay debts off quicker) and I know my rating isn’t even good enough to get a contract phone :(
Sara (Debt Camel) says
Payments to creditors that do not show on your credit record are irrelevant to your credit score.
You need to compare what is on your Experian report (what are you looking at?) to what is on the ClearScore/equifax report – there much be problems showing on the latter that aren’t on experian. I suggest yopu identify these. It is unlikely to be your overdraft as banks normally report to all the credit reference agencies so it should show on bothe reports.
Your overdraft. Do you get back into the black on payday or are you always in the red?
Thembi says
ClearScore has a rating of 1/100 (it’s gone down 1 since last week—not a scooby why). They have suggested the following are having negative impacts on my affordability score (I’m listing them in the order they are on ClearScore):
1. Avoid debt collector fees – You’ve been charged debt collector fees 33 times in the last 5 months (non are defaulted so I agree they shouldn’t be noted
2. Avoid going overdrawn – You’ve gone overdrawn by £2046 in a typical month
3. Withdraw less cash -You’ve withdrawn cash 44 times in the last 5 months (this seems excessive but it’s amounts to 8 payments if £1.00 per month to 5 creditors)
4. Highest balance under £1000 – Your highest balance across linked accounts is under £1000 in a typical month
5. Keep £200 in each account -You’ve had less than a £200 buffer in some of your accounts over the last 5 months
My main questions are:
a) Between 1 and 2, which should be my priority?
b) Creditors are paid by Direct Debit so I am wondering if a standing order would remove it from the list above?
I am in the black on payday (but only by £100), my overdraft is £2000 however, I was struggling to pay the overdraft fees of £48 due to the date of the month it was being charged so I am generally over that £2,000 for 3-4 days, however, I have amended this date with the bank so I do not expect to be £49 over in future—I know this will be having a heavy impact.
c) 3 is easily resolved.
d)I don’t know what 4 means because my salary is way over £1000 (it would be great if you are able to clarify).
e) 5 will be resolved in coming months because my salary will increase significantly.
Sara (Debt Camel) says
Avoid debt collector fees – are you saying you have never been charged debt collector fees? Several people have mentioned this issue. ClearScore seem to be getting something badly wrong.
Withdraw less cash -You’ve withdrawn cash 44 times in the last 5 months (this seems excessive but it’s amounts to 8 payments if £1.00 per month to 5 creditors)
Making payments by direct debit should NOT count as withdrawing cash! It just isn’t. It is a standard bank transfer. Switching to a standing order would make absolutely no difference at all.
4. Highest balance under £1000 – Your highest balance across linked accounts is under £1000 in a typical month
You asked what this meant as your salary is a lot more. But this is the balance on your account after you are paid, so most f your salary is just clearing your overdraft.
You asked what is more important, 1 or 2. But if 1 is just wrong, there is no way to avoid this… I have seen people be told they have been charged debt collector fees who say they don’t have any debts with collectors.
Have you been very deep in your overdraft for a long period?
Thembi says
Apologies, amending for clarity:
1. Should have read: Avoid debt collector fees – You’ve been charged debt collector fees 33 times in the last 5 months (non are defaulted so I agree they shouldn’t be noted (this seems excessive but it’s amounts to 8 payments if £1.00 per month to 5 creditors). I do have creditors whom I pay my direct debit (£1 p/m) so I wonder if I change to pay them by standing order, it won’t reflect as them ‘charging fees’. So 1. is correct in the sense I am paying debt collectors.
Unfortunately, I haven’t been out of my overdraft since I got it in 2011, I always use the full £2000 (plus overdraft fees) therefore I have never had a disposable income out side of that, again, salary will improve soon.
I am hoping if I clear the overdraft the score will be boosted enough for me to get a car lease. Thereafter, I will focus on the debt collector accounts in order to be mortgage ready, but I’ll take your advice on that.
Sara (Debt Camel) says
What are these amount with debt collectors – what were the original debts and why have they not been defaulted? this is going to have a MAJOR impact on your ability to get a mortgage.
“Unfortunately, I haven’t been out of my overdraft since I got it in 2011, I always use the full £2000 (plus overdraft fees) therefore I have never had a disposable income out side of that”
it sounds as though you should make an affordabilty complaint about this overdraft. It is possible you could get a large refund. I will be publishing a new article on this in a a week or so, so look out for it (you can be notified when a new post is published by sunsbscribing to this blog, see below.)
A car lease requires an excellent credit score, so that sounds unlikely. You can get a car on HP with a not good score but it will be expensive and may make it hard to get a mortgage.
Thembi says
The total owed overall is £3,703.75. These were defaulted between 2012 and 2014 so I have just got them all off my record (or so I thought), they include:
Lloyds, Shop direct ,Barclaycard, Vanquis, Vodafone and Aqua; unfortunately when I was a student I fell victim to the constant offers of credit cards which it should have been clear I couldn’t afford living only on my student loan and grant.
Which would you say should be my priority i.e.which has the most negative impact, the debts or the overdraft? I will need to start somewhere, the plan is to repay all debt by October to be mortgage ready however, a vehicle is the first priority because not having one is causing huge expense, the second biggest after rent, so I’m trying to chip away at the debt with the view of getting closer to car lease ready first.
Sara (Debt Camel) says
If these debts are not on your credit record (have you checked? checked all three credit reference agencies, not just ClearScore which only reports on Equifax data? See https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to check Experian and TransUnion data) then they will not affect your credit score.
The old debts could potentially affect your ability to get other credit (such as car finance), but only if a lender is checking your Open Banking, or is using ClearScore to assess affordability. I don’t know how many lenders actually do that at the moment, possibly not many.
The lenders that 100% will check are mortgage lenders, who ask for your bank statements and will see these payments showing that you have old defaulted debts. That is why they have to be settled 6 months or more before you make a mortgage application. But they do not have to be settled in full, as the article above explains. they will NOT reappear on your credit record if they have dropped off.
The exception here that you may want to look at is asking the debt collector (not the original lender – I am assuming all these debts have been sold to a debt collector?) to produce the CCA agreement for the debt. See https://debtcamel.co.uk/ask-cca-agreement-for-debt/ for all about this. if the CCA cannot be produced the debts are unenforceable and you can simply stop paying.
So in answer to your question, if none of the old debts are on your credit record, then it is the overdraft that may be the most important. But I can’t guess how many lenders will be interested in what ClearScore says about affordability.
I repeat what I said before – car leasing requires an excellent credit record.
AJ says
I’ve been in a DMP for 9 years so it doesn’t show on my credit profile anymore and my Experian credit score is 964/999
i’m trying to remortgage for debt consolidation and borrow a little extra but no high street banks or building society want to know.
The only option i have is to come out of the DMP, partially settle all debts and then apply for the remortgage.
I should be ok right given my high score? i have a perfect credit report with all the 3 CRA’s that they use so no settlement should appear on my score after having paid it? i don’t want to be in a position where i pay it then end up with an even worse report.
Sara (Debt Camel) says
all the interest is frozen on your DMP debts I assume – why would you want to consolidate these? how much extra do you want to borrow and why?
how large is your current DMP balance? What sort of debts were these? have most/all been sold to debt collectors?
do you have any money to make partial settlement offers at the moment or would you be borrowing to do this?
AJ says
Yes interest is frozen. I want to consolidate them so that everything is done with, the DMP is the only thing that’s making it very difficult to get a remortgage.
The LTV on my property with what I want to borrow is 48% so I’m not even high risk on that either.
DMP is for 22k but partial settlement would be for £7200, most have been sold on yes apart from one.
I was trying to do it as a debt consolidation through the remortgage but I may have to come out of the DMP and partially pay off the debt to get a remortgage accepted.
Also StepChange have confirmed this morning that if I partially settle the debt it will show on my credit profile regardless of how long I’ve been in a DMP for.
Sara (Debt Camel) says
Also StepChange have confirmed this morning that if I partially settle the debt it will show on my credit profile regardless of how long I’ve been in a DMP for.
That is nonsense. Just factually wrong. Once a debt has been defaulted and dropped off your credit record after 6 years it will NOT reappear if you settle it in full or partially.
One thing you could look at before consolidation or partial settlement is whether the current creditor can produce the CCA agreement for the debt… see https://debtcamel.co.uk/settlements-old-debts-cca/ which looks at a similarish case to yours.
AJ says
I’ve also spoken to many advisors and underwriters with Yorkshire Bank about this and even they’re saying that even if I came out of my DMP and partially settled the debts they would still require me to be out of it and managing my own finances for 12 months before they would even consider a remortgage application, even though I have an excellent credit score and nothing bad on my credit file. I just seem to be at my wits end with it all, they want to keep me in debt rather than paying it off it seems it’s ridiculous
Sara (Debt Camel) says
so where would the £7200 for partial settlement come from?
AJ says
The remortgage or trying to which isn’t working so the only option I haven’t explored is a secure loan to do everything. That’s my last option really.
Sara (Debt Camel) says
Well have a look at the link I gave which covers asking for the CCA agreement for some of the debts – get lucky with enough and you may simply be able to pay the others off.
A secured loan would be very expensive. And usually variable rate, so who knows what it could increase to?
Maya says
Good evening Sara,
I am due to inherit some money and hope to A) pay off debts and B) get a mortgage with the remainder as a deposit.
I have an arrangement plan with several creditors. All older than 6 years and none appear on any of my credit reports.
If I offer a settlement of say 80% would this show anywhere on my file and affect my mortgage application?
Is it better to pay in full?
I have read most mortgage lenders look at 3 months of bank statements.
Does this mean if I do settle the arrangements then in 3 months I could apply for a mortgage?
My credit rating is very good 900/1000. My debts all stem from 10 years ago and my student days and I have kept on top of it all since.
I have never missed a payment on any of the arrangements or anything else in 8+ years if this helps.
Also can a tax credit overpayment be counted as debt even if they are taking the over payment back directly (changes in hours/pay over the pandemic and maternity leave are the cause).
Sorry for so many questions.
Sara (Debt Camel) says
A partial settlement will not casue a debt to reappear on your credit record.
Many mortgage lenders ask for 6 months of bank statements, not 3.
You will have to be careful not to apply to any mortgage lender that is related to a creditor you defaulted with – so not Halifax if you were paying off a Lloyds overdraft.
Tax credits are a debt but it isn’t one a mortgage lender will usually mind about, but they will consider your income after the deduction for repayments when assessing affordability.
Read https://debtcamel.co.uk/settlements-old-debts-cca/ as it suggests another approach which may be useful.
Maya says
Thank you very much. This is all very helpful.