A reader has asked how Full & Final settlements (F&Fs) would affect her credit rating which is currently looking good as her debts were all defaulted and have dropped off her credit record.
A full and final settlement happens when the creditors agrees to accept an amount which is less that the total owed to settle a debt, and agrees that the debtor will not be pursued for the remainder. For more details, see this Guide to Full & Final settlements.
This article looks at how F&Fs are shown on a credit record in the two different situations:
- where the debts are still showing on your credit record, and
- where the debts have already disappeared.
Some different names for this
F&F settlements are often called partial settlements, because you don’t pay the full amount, only part of it.
Creditors usually mark the debt as partially settled on your credit record rather than settled.
If the debt has previously defaulted, the term settled is not used and the term satisfied is used instead. A F&F settlement on a defaulted debt is then marked as partially satisfied. I talk here about settled debts because that is is how creditors normally talk to you, even though the credit record term is normally satisfied.
Debts that still show on your credit record
When you settle debt, partially or in full, the balance is set to zero. The debt will then disappear from your credit record six years after the original default date.
If the debt hasn’t been defaulted, it will disappear six years after the settlement date. But it is unusual for a creditor to accept a F&F unless a debt has been defaulted. You may want to ask for a default to be added, see What should the default date for a debt be? for more about this.
It is common for a creditor to tell you that the debt will stay for six years from the settlement date. This isn’t right if there is a default date on the record. It will drop off six years from the default date whatever you do.
How does a partial settlement affect your credit rating?
Your credit score is a complicated calculation looking at lots of different factors – but a partial settlement marker isn’t usually one of them at all, as James Jones from Experian explains. But lenders may make additional checks before deciding whether to give you credit. This is more likely for larger credit applications – mortgage or car finance say.
Some lenders may not care if you have partially settled a debt. And some lenders will reject you even if you have fully settled the debt. So it can be hard to decide if paying the extra money is worth it.
Think about the size of the discount you can get and how long the debt will stay on your credit record. For example:
- if the creditor will accept £500 to settle a £1,500 debt that is a big discount. And if the debt will drop off in the next year, it’s probably a good idea to grab it!
- if the creditors will only accept £1,300 to settle that £1,500 and the debt is still going to show for another four years, you may think it’s worth paying more to get the debt marked as fully settled.
The rest of your financial position also matters:
- with lots of problems on your credit record, getting one debt marked as partially or fully settled probably won’t make much difference at all;
- if you can’t afford to repay all your problem debts, it’s usually better to settle as many as possible partially, rather than take longer to repay them in full.
Wanting a mortgage is the most difficult situation – I look at it in detail in Will partial settlement make getting a mortgage harder?
Debts that have disappeared from your credit record
A defaulted debt drops off your credit file after 6 years, which is why the questioner is no longer seeing these old debts on her record. But would settling one bring back the debt? You can see why she wouldn’t want her new, clean credit record spoiled by having some partial settlement indicators added to it…
The answer is simple – after a defaulted debt has gone from a credit record, it will never re-appear. You can offer a F&F settlement on these debts and not risk them coming back and damaging your credit score. If a creditor tells you that a partial settlement will be shown on your credit record for another six years, they are wrong.
Why offer a F&F if the debts have disappeared?
You might wonder why the questioner would bother making Full and Final offers on debts which have disappeared from a credit record. There are two reasons why trying to settle old debts is a good idea:
- a debt that isn’t showing on your credit record still exists. Unless it is statute-barred the creditor can still chase you for the money. See Do I still have to pay a debt which isn’t on my credit record? for more details.
- if you apply for a mortgage or a re-mortgage the lender is likely to ask about all your debts, not just check your credit record.
So as defaulted old debts can often be settled for low Full and Final offers, it makes a lot of sense for the questioner to try to deal with hers.
This article was originally published in 2014. It has been updated with new examples and links.
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Sandie says
Hello, just need some help on the following, we currently have debts that are in a DMP company and we have recently gone direct to the companies involved who have our debts. We wrote to cabot asking for F&F on about 6 accounts some they have discounted some they haven’t.
I have been told the ones they haven’t reduced is because there was a ‘pre default’ on the account before they took over but there has been none since and we have been paying now for approximately 8years. Trying to get ourselves sorted and now we will not be able to do so :0(
Is it common practise that these companies do not reduce debts because of this reason?
Thank you.
Sara (Debt Camel) says
can you give some details about the original debts – what type of debt, who from, when did the account start?
do these debts show on your credit record?
Sandie says
The original debts came from various credit cards/loans we now pay a monthly amount to Cabot through a debt agency. An arrangement does show on my husbands credit report from Cabot but they only put it on there in the last 6months which is odd as we have been paying them for years! The debts started 8 years ago. Thank you
Pam says
Hi,
I have a default on my account by shop direct for £2961, but the default balance is £1984. This was added on 26/6/2013.
This debt goes back to 2006, but I only checked my credit record last year and I have found a letter with default date back to 2012.
Iv requested a signed credit agreement several times, but nothing was found and in 2013 lowells contacted me to say the account had been passed back to shopdirect and closed cause no signed credit agreement was located.
I have been reading on internet (legalbeadles) that people have been taken to court , even with no signed credit agreement and lost and received a ccj, I don’t want this to happen .
Should I contact them regarding full and final settlement and if so how much should I offer. I’m having sleepless nights over this.
I definitely can’t afford the full amount , but if I have some idea off what to offer I can try and raise that amount. And what amount do I work on, the debt amount £2961 or the default amount £1984. I really need closure in this as I’m going through a difficult break up and these arrears are stressing me out.
And also what do I put in the letter so they can’t come back to me in future?
Sara (Debt Camel) says
If they couldn’t find the paperwork for the account in 2013, I don’t think you have anything to worry about. You could call National Debtline 0808 808 4000 to confirm this. I don’t know what Legal Beagles case you are referring to but no CCA agreement is an excellent defence. Also the fact it has gone quiet for 4 years means the creditor doesn’t think they would win either.
Pam says
Iv phoned national debt line and they said don’t worry, but it’s just stressing me out so much . The default letter I have is for Jan 2012 and they added a new default in July 2013, so this is about 1 1/2 years extra I have to wait to get it off credit file . I just thought if I off F&F and request they go back to date Jan 2012 my credit file will be sorted by Jan next year.
Sara (Debt Camel) says
Well it’s your decision if you want to offer a f&F settlement – but you absolutely shouldn’t be thinking of borrowing the money to do this.
If you really want to do this , I would suggest making it a VERY low one as this debt appears to be unenforceable. I would be thinking £100. Point out in your letter that they are unable to produce the CCA documentation so the debt is unenforceable. And say your offer is conditional on them agreeing to correct the default date to Jan 12 as per the letter you have, attach a copy of it.
Kfe says
Sorry if this doesn’t follow the thread
I have just over £6000 in debt, it is now past the 6 yrs…i am near to retirement and want this to be over… what should I do
Sara (Debt Camel) says
Do you think the debt is statute barred? See https://debtcamel.co.uk/statute-barred-debt/.
Pam says
Hi not sure if you mean me Sara , my debt isn’t statue barred. I paid a reduced instalment back in 2013, then lowells said the account was closed
Sara (Debt Camel) says
I was replying to Kfe, not you :)
Stan says
I have been with a debt management company for 9 years and recently I wanted to settle my debts so asked them for a settlement figure from my creditors…they came back with a figure which I duely paid… they have now come back to me a couple of months later saying that the creditors want more money…the people From the debt management company that we’re dealing with my account have left the company so I was wondering what rights I have or don’t have against paying the extra money ?….
Sara (Debt Camel) says
Who is the debt management company? What did you have in writing from them about this?
Stan says
The company is called Moneyplus Group….. I’ve had no written information from them it was all done over the phone
Sara (Debt Camel) says
If you think your phone calls were clear that you wanted to offer the money in a full and final settlement, then you should put in a formal complaint to Moneyplus, email is good complaints@moneyplus.com. They will still have the phone recordings.
Stan says
Yes I could complain but do I have any rights in not paying the extra money ?
Sara (Debt Camel) says
I can’t tell if the creditors have a right to ask for this – they may have agreed to a F&F and be trying it on.
Or Moneyplus may have not explained the full legal situation to you – in which case you could ask for compensation.
Or Moneyplus could have been negligent in not asking for confirmation from the creditors that this was being accepted as a full & final settlement.
Legally there is also a different situation if the settlement money was coming from a third party – a relative say – and not from you.
Fiona says
Help please! I have offered to settle my Iva, I have offered 2720 I have 20 months left paying 134 pm, I have received a letter saying my Iva company (Harrington brooks) will be taking my offer to my creditors in 6 weeks 14th July (I made the settlement offer on the 21st April), but are charging £500 for an early settlement fee and £400 for a variation meeting? WHAT!! Is this correct? An extra £900 ? Can they do this? What happens if my creditors say no? I’m lucky that my partner has offered as a gift to settle the debt let alone an extra £900? Thanks
Sara (Debt Camel) says
I don’t think you will be asked to pay these fees, they will be deducted from the money your creditors get. And I think the early settlement fee replaces some of the fee they would be charging for the rest of your IVA, it’s not an entirely new fee. Ask HB and they will confirm this.
If your creditors says know, then you can use the money from your partner to make the monthly payments. It won’t make a lot of difference to you probably – an early settlement doesn’t remove the IVA from your credit rating, it is there for the full 6 years.
steve says
Yes thats right i agree with sara they cant put 900 fees on top of the original debt
Steve
Carly says
Hi Sara,
We are approx 18k in debt with an active DMP. We are due to complete on our house sale next week and are going into rented accommodation for 12 – 24 months to try and rebuild our credit a bit.
We have defaulted on 21 of the 26 credit accounts we have and most of these defaults date back to 2012/13. Would it make a massive impact on our credit rating (418 and 512 with Noddle) if we make F&F offers? Ideally would like to clear all debts for 10 – 12k if possible.
Thanks.
Sara (Debt Camel) says
F&F offers won’t directly reduce your credi score, but they may make some lenders less prepared to lend to you, especially mortgage lenders. See https://debtcamel.co.uk/dmp-partial-settlement/ for more about partial settlements and looking towards getting a mortgage.
In your case, it sounds as though all the defaulted accounts will have disappeared from your credit record in 2018/19. If you stay renting until these have gone no-one (except the creditors with the defaulted accounts!) will ever know that you partially settled them.
Lou says
I was trying to figure out something with F&Finals. We are on a DMP (have been for four years), many of our debts were owing to HSBC and Lloyds bank, and are thinking about doing F&F’s, but are hesitant because we wish to get a mortgage (in 3 or so years, when the defaulted debts fall away and we have had time to save in our new debt free lives -woohoo!). Our only reservation is, if we do a F&F and it falls away from our credit score as it should after six years, would we affect our chances of getting an mortgage with either of these banks/ their sister companies as they will have their own records/ history with us. Or does this also get shredded after six years too. We would prefer to have as many doors open as possible when it does come time to get a mortgage and would be helpful to know if doing F&F’s will affect us in this respect. Thanks for you help!
Lou says
Sorry, have just found this page which answers my questions: https://debtcamel.co.uk/dmp-partial-settlement
It is a shame but as we would prefer to have open doors for the best possible options for ourselves, we will have to think carefully on whether a F&F is for us.
Thank you for such an informative site!
Sara (Debt Camel) says
In your situation, I would probably go for F&Fs for four reasons:
– you will have more money for a deposit
– there are plenty more places to get mortgages form, ruling out HSBC & Lloyds is not really a problem.
– you should try to avoid applying to anyone you have previously defaulted to. Whether you settled the debt fully or partically makes less difference that the fact you defaulted!
– if the debts have been sold to a debt collector, the original creditor will have no idea how you settled the debt.
Lou says
I find this is a very good point: – you should try to avoid applying to anyone you have previously defaulted to. Whether you settled the debt fully or partically makes less difference that the fact you defaulted!
I never really saw it this way, but you are right the prejudice from these creditors will already be there in the form of a default should they choose to scour their own records, in which case how the debt is settled is neither here nor there as their background on us has already set the outcome and there is no ‘changing their perspective of us’. No point in being a martyr about it.
Thank you as always!
abdul says
Please i need advice please, i owe Lloyd bank £2400 from November 2012 and the account as been transfer to Lowell group because i default payment but i have an agreement to by £60 monthly have paid £500 so far but have been offer an agreement to pay part payment of £900 for them to clear my debt as partial payment. is it a good deal ? if yes is it going to affect my rating in future for mortgage or loan.?
Sara (Debt Camel) says
If you currently owe 2400 then an offer to settle for 900 isn’t bad. Can you afford this much?
Has this debt been marked as defaulted? What sort if debt was it, and when was the account opened?
steve says
I would say it is a good deal and pay that amount to clear it and then thats one less thing to worry about. It drops off your credit file from the date you defaulted from. Hope this helps
Ash says
Hi I have one default on my credit file for £999 to NatWest it was put on there in may 2013. It is the only default I have on my file, I have never heard from them or had them contact me in all these years but this one mark is holding me back and I am looking to get a mortgage as soon as I can clear it. What shall I do with this? I contacted eqifax and they have spoken to NatWest and said it’s unsettled and they can’t remove it until 6 years is up or I pay the amount in full or at a discount rate. But will paying a lower rate affect my score when applying for a mortgage as it might show at part settled… am I correct? What’s the best thing I can do? Thank you Ash
Sara (Debt Camel) says
Is this debt yours? If it isn’t you should challenge it.
Assuming it is your debt, then you need to settle it. Whether paying a lower amount will matter if you want a mortgage is a difficult questions, see https://debtcamel.co.uk/dmp-partial-settlement/ which looks at this exact issue.
You should also do this asap as most mortgage companies will not consider you for a mortgage unless all your defaults were settled more than a year ago.
Tom says
I have a partially settled debt on my credit report which is worrying me as im now applying for a mortgage. The debt was originally with cap one and was for £800 defaulted in 2013 and settled 2016 with cabot. Just wondered if this would be a problem when it comes to my mortgage application. Thanks for your help.
Sara (Debt Camel) says
A rule of thumb is that there are some high street lenders who don’t mind a default provided it is over 3 years old and was settled more than 12 months ago. But go through a broker, not direct to a lender.
Simon says
Hey Sara
I understand your post but just want clarification.
Santander – I defaulted Aug 2011, I settled at a reduced amount in Sept 2016. I paid in one full go. It’s cleared off my defaults but is in closed account and shows satisfied. Should this be removed or will it stay on till 2022? Will this record affect credit applications?
Hoist – I also had another debt from Aug 2011, I cleared it by monthly installments and paid my last one Jan 2017. I arranged this in Sept 2016 so the report shows settled in Sept 2016. How does this affect me?
I’ve noticed that the Santander one shows green from the day of default.. But Hoist shows red all the way till Sept.
You said Settled and Satisfied are interchangeable,is that the case here?
Do I need to get these two records removed?
Sara (Debt Camel) says
is a default date showing on the Santander record? the Hoist record? for the Hoist record, who was the original debt with and what does that show?
what credit report are you looking at?
Simon says
I’m looking at Noddle,
For Santander, I can see
Account start date
10/12/2008
Account end date
11/04/2016
Payment start date
10/12/2008
For Hoist I can see
Account start date
08/10/2008
Account end date
01/09/2016
Opening balance
£ 749
Repayment frequency
Monthly
Date of default
22/09/2011
Default balance
£ 749
Seems like a difference due to the payment in full and monthly?
The Hoist one is actually a HSBC account. But Hoist were managing both. When I paid the Santander one in full they pulled me up on this one so I set up the DD. Surprised the Santander one doesn’t say Santander.
Also say in 5 years I approach these banks. Will they know I was once in serious debt with them?
Rose says
I have defaulted joint debts with my ex husband (joint mortgage 8000 in defaulted 2013 and unsecured loan 2100 – defaulted in sept 2017 – not sure why so late as all debts was not paid since the same time 2013) there were originally 3 but I paid of the other one. The debt company that bought the 8000k suggested me to partially settled the debt for my behalf and said what ever is left will be chased to my ex. As far as I know joint debts is you a are liable for the full amount? They said they will do a letter that said I have partially settled and debt charity confirmed that, even if they take me to court for the rest, they wont win as that’s the same as fraud. Advice?
Sara (Debt Camel) says
Which debt charity? Have they seen the wording that the debt collector used?
You may want to ask them to correct the default dates see https://debtcamel.co.uk/debt-default-date/ but you can d this after the F&F is settled.
andy says
Hi, I have 4 creditors (2 loans and 2 credit cards). I have defaulted in the last year on both credit cards and one of the loans. I am up to date with the other loan. I have just sold my house and due to complete soon. I will be in the position following the house sale to partially settle at least one of the 3 defaulted amounts and depending on what figure they accept, possibly 2 of the defaulted debts. Its highly unlikely I will be able to clear all 3 of the defaulted debts. I am intending to continue with the ‘good debt’ that I have as I hope continuing to stay up to date with this loan will help repair my credit rating which has taken quite a savaging. Is it worthwhile partially settling the other defaulted debts at this stage and what effect will that have on my current credit score and the direction it takes in the near future? I currently have arrangements with each of the 3 defaulted debts, repaying a small amount each month.
thanks
Andy
Sara (Debt Camel) says
Carrying on paying the undefaulted loan normally is a good idea – this will stay on your credit record, looking good, from 6 years from the point it is paid off.
How large are the defaulted balances? How long ago were the defaults? How much to you hope to have after all your sale & moving costs?