A reader asked if his credit score would improve if he paid off some debt.
First a useful warning from Experian:
There’s no one credit score or magic number – different lenders score differently.
But a good place to start is by looking at what exactly is on your credit records. There are three credit reference agencies in Britain and you have to check all three as they may have different details. Luckily you can check your credit files for free.
I expect you are reading this because you have been declined for credit or you are worried that you may be. Your credit score is a big part of this but some lenders have extra criteria so they matter too.
Debt shuffling doesn’t help
In this article, “paying off debt” means paying it off from your income or savings so that you owe less money overall.
Taking out a new loan and using that to clear some credit cards isn’t paying off any debt, it’s shuffling it around.
Debt shuffling can cut the interest you pay – that’s good! But it won’t improve your credit rating.
Have you borrowed “too much”?
If your borrowing is high, then this impacts on your credit score because you will be using a lot of your credit limit – this is often called “credit utilisation”. Your credit score:
- drops if you are using over 90% of a limit on a credit card;
- gets a boost if you are using under 30%.
So if you repay some debt, your utilisation gets less and your credit score improves.
Take the example of Mr A. He hasn’t had problems managing his debt – no late payments let alone defaults. But he has borrowed a lot and his credit cards are maxed out. His credit score isn’t bad, but he’s not sure why it isn’t perfect already and he is upset that he has been turned down for a 0% credit card deal.
If Mr A stops borrowing and starts paying back his debt then his credit score is going to be climbing back to “perfect”, because it sounds as though the only problem he has is too much debt.
If he can concentrate on overpaying the highest interest card, he will also be reducing the amount that goes in interest every month – see A Guide to Snowballing for more details. And, after a while, he may then be able to get that 0% balance transfer offer, which will speed up his repayments even more.
A few late payments
Lenders don’t like late payments, but they aren’t as bad as defaults or CCJs. In general a lender will mind more about recent late payments because they show you could be struggling at the moment.
Look at Ms B’s case . Se was careless with her finances after she left uni and had several late payments four to five years ago but now she has a better job and wants a loan for a car. A lender is likely to be happy to see her debts reducing and may then not care about the old late payments.
If her late payments had been last year, then just starting to pay off the debt may not be enough immediately. But if she carries on repaying debt and not making any extra credit applications though her credit score is going to be start improving slowly – her total debt is falling every month, her “credit utilisation” is improving and the late payments are becoming “older” and they then have less of an affect on your credit score.
Defaults on your credit history
Defaults are much worse for your credit score but they drop off after six years.
A previous article Paying a defaulted account and your credit score looked at this in detail. In summary:
- repaying a defaulted debt does NOT increase your credit score;
- but many lenders are more likely to give your credit if you have repaid the defaults;
- until the default drops off your file after 6 years, your credit record isn’t going to get to be great;
- starting to pay small amounts may not improve your score but could prevent a CCJ, which would be worse than a default.
Is there anything good on your credit file?
Although credit scores tend to improve as time goes on – because defaults drop off or bad things get older so they matter less – it’s also important to have new, good marks being added.
If your credit record is basically a pile of old, bad marks your score is never going to be good. Even when they go completely, your credit record will just look “thin”, confirming your identity but not having anything positive to say.
This can feel a bit of a dilemma if you have just got yourself out of debt. Not only do you not want to go back into debt, but it’s going to be hard to get credit at a reasonable price.
Some things that can help:
- a mobile phone contract that will often be shown on your credit record;
- consider getting a “bad credit” card, using it every month and repaying it in full every month, never leaving a balance. You have to be disciplined to do this! These cards can be dangerous, after a year a quarter of all new users have serious arrears.
- if you can save £20 or more every month, then look at LOQBOX.
Don’t try to consolidate debt at a high rate. Avoid all high-cost loans, not just payday loans but the large long terms loans at 20% or more, including guarantor loans. These are very bad ways to try to improve your credit score.
High street mortgage lenders will rule you out with recent payday loans even if they are paid on time.
So what’s the answer?
Clearing debt improves your chance of getting more credit. If your main problem is that you have too much debt, then paying it off is the only way to improve your rating.
But taking out more debt such as a consolidation loan is not paying off debt, it is just shuffling it around.
If you have other problems in your credit history then clearing debt will still help as your debt balance is dropping, but it may not have a quick impact. But it stops your score getting worse.
The credit card minimum payment trap
Do you have to pay a really old debt?
Can I transfer a loan to partner who pays it?
Jacqui says
I have a relatively small old balance on a credit card (circa £150) I had forgotten all about it until I did a credit check and found that the lender (Tesco Personal Finance) has been issuing a default every month. This debt is at least 8 years old. Last payment to that account was in 2008. It seems to be really badly impacting my credit score. What are my options?
Sara (Debt Camel) says
A default date from 2008 would have dropped off your credit report. It may be that was the time you stopped paying but they didn’t add a default date until later? Can you have another look at your report?
Jacqui says
I’ve been checking on Noodle and the default date is I’m 2015. So I’m very confused! I’ve had absolutely no communication with Tesco personal finance over this debt since 2008 either.
Sara (Debt Camel) says
See https://debtcamel.co.uk/debt-default-date/ which looks at how to get the default date corrected so it drops off your credit file.
Jacqui says
Thanks so much for your help on this one! Took less than a week for Tesco to come back and admit their error, confirm that they’ll write to the credit reference agencies to confirm the error and give me a cheque for £100 for my inconvenience! Just really annoyed I didn’t check my credit file before now.
Ian says
When you pay off defaults how long does it take to improve the score? For example, I have a few old defaults and a low credit score. If I paid them all off tomorrow, how long would it take for my score to improve? And say if I paid everything off so I am at 0 would there be a big improvement? Obviously the fact I defaulted and took a long time to pay would be on there and other than the repayment in one go there wouldn’t really be any positive markers. But it would show I have no existing debt.
Sara (Debt Camel) says
Paying off the old defaults starts the process of repairing your credit score, how long this takes depends on how old the defaults are – one that was from last year is going to be around for another 5 years.
If your other non defaulted credit is too very high, this will also be harming your credit score so repaying it will help. It’s a good idea to get loans and overdrafts down to zero. Credit cards too, but here it’s good if you then carry on using them and repaying in full every month as this gets you positive markers. The ideal situation is no debt AND positive markers.
Kris says
Hi, I have a number of deafults ranging from 2011 to 2014. I have recently been given a cash injection and am looking to buy my rented house next year. is there a procedure to follow whereby I can offer creditors a settlement for them then to remove the defaults from my file.
Than,s in advance
Sara (Debt Camel) says
Basically no. You want to get these debts settled as soon as possible so that when you apply for a mortgage the defaults have been settled over a year ago. There are mortgage lenders who will offer mortgages if your defaults are all over 3 years old and if they have been settled for a year so it is clear that you no longer have any financial problems. Don’t apply directly to a high street bank though as you don’t want to be refused, go to a broker and explain about your credit history.
Ellie says
Hi I have just closed some old credit cards that I don’t use and pud off a ten thousand pound loan, would you be able to tell me how long this should take to improve my credit score?
At the moment my score is ‘fair’ but I think that’s because I have too much credit.
The only other thing that may effect my score is from recently trying to get a loan on a couple of different websites that got declined.
Sara (Debt Camel) says
Each lender will update your debt with the credit ratings agencies once a month, so it may take a months or so for all the closed credit cards and the repaid loan to all update your credit records.
As a further complicating factor, if you are using Noddle, the free credit report, a new report is only created 30 days after the previous one you accessed (see http://useyournoddle.tumblr.com/post/22320908495/how-often-does-your-noddle-credit-report-update). So there will be a period where any of your lenders looking at the real database will see the changes but you can’t see them yet! If you are using a different free report, you may want to find out how often that is updated.
It’s going to best to wait a couple of months though before applying for more credit so the recent declines are older.
Db says
Hi Sara,
I have a question about a default, it’s for a Lloyds loan for £25000. There is still a balance of £20000 but the default was put on the account almost 6 years ago. It will fall off my credit file in 2 days. Once it’s off my credit file will no one then be able to see this if I apply for new credit? I’m also paying them £20 a month but this will take 80 years to pay off. But with the default drop off what negative Impact does this debt have other than its still there and I own it, what would be stopping me just paying the £20 each moth until I die? I know I would have to do reviews every 12 months but other what that is there anything else I need to be aware off? It’s not something I’m going to do because i understand the debt is my problem but I just want to understand how it can impact me with it still being there even though the default is gone?
David says
Hi
My daughter ran up a few catalogue debts when she was a student that she’s slowly paying off now They have home to Lowell finance agency. My question is can I take on the debt and transfer it into my name and get it off her credit file? I’m in a better position to pay instalments and I want to help her boost her credit rating if I can
Sara (Debt Camel) says
No you can’t. You could pay it off completely for her, but the debt can’t be transferred to you.
Andrew Lamb says
I have recently (partially) paid off five debts against which I’d earned defaults. The balances now show as zero and “partially settled”. With the defaults in place would I be likely to pass a credit check for a car finance plan, the “balloon payment” variety?
Sara (Debt Camel) says
There are various types of car finance. It sounds as though you are talking about PCP – anecdotally you normally need a better credit rating for PCP than hire purchase so it may be difficult. You may find this https://www.moneyadviceservice.org.uk/en/articles/whats-the-best-way-to-finance-buying-a-car helpful.
Andrew Lamb says
Thanks for the link – very useful. Are you able to give a clearer answer about my defaults and acceptance for finance?
Ian says
I have a number of defaults on my credit file, I now have the opportunity to pay off these debts, how long would I need to wait to be able to get a mortgage to buy the flat I’m currently living in ?
Sara (Debt Camel) says
The defaults will disappear from your credit record 6 years after the default date. Some mortgage lenders will not consider you if you have any defaults on your file. Others will look at you if the defaults meet their criteria – for example that the defaults must have been more than three years ago and have been paid off for a year. You need to settle the debts as soon as possible and then talk to a mortgage broker who will be able to suggest which lenders to apply and when.
Matt says
I think I am example Mr A! I have two loans and two credit cards and a car finance. The two loans total 10k and one card has 8k and the other 1.5k so 19500 in total. I have been trying to get a loan 3 times and have been declined by all, most likely due to my high balances but I want to consolidate so I have the one monthly payment and to take it over two years. It makes sense for me and also my affordability cause I just end up in the circle of paying off each month but then I end up using the credit card again cause I’ve been paying to them. Really, all I want to do is pay off everything and put it into one loan that isn’t 21%apr and close the credit cards! My score on Experian is 978 and equifax is 371 so they are fair scores. Should I wait a few months before applying again?
Sara (Debt Camel) says
That sounds a lot like Mr A… you may also find this article useful: https://debtcamel.co.uk/debt-consolidation-loan-bad-credit-score/
You need to wait at least 6 months before applying again, as refusals hurt your credit score. During that 6 months, your loans and credit card balances will be dropping. Try to “fix” your credit card repayment at a level which is more than the minimum – see https://debtcamel.co.uk/fix-credit-cards-payments/ – and stop using the cards. leave them at home or even better, cut them up!
After 6 months, have a look using a soft checker such as MSE’s Credit Club (see https://debtcamel.co.uk/best-way-to-check-credit-score/) at what you might get before applying. And thinking of only apply for enough to pay off the most expensive debt, not the whole lot. It is VERY hard to get an unsecured loan that will consolidate that much debt.
Dave says
Hello Sara, I would like some advice if possible. I currently have 2 defaults on file; one from HSBC credit card which was applied a few months ago (still paying back monthly payments, many missed payments) and also my HSBC current account overdraft which was applied a few years ago (I paid this off immediately). I had a PCP finance deal which I missed a few payments and also a mobile phone account which I have missed a few.
I have a large amount (around £5000) of debt for my now current account and payday loans which are in payment plans with missed payments. My question is that, because I will be able to clear all outstanding debt including the overdraft, realistically will my credit report improve a lot? and is there a way to approach the debt which is in payment plans (for example requesting a full and final settlement).
Any advice appreciated?
Thanks and BR
Dave
Sara (Debt Camel) says
Settling the debt starts the slow process of improving your credit record and also it prevents it getting a lot worse if the lender goes for a CCJ!
After a few months get a bad credit card and use that each month to start getting some positive ticks, see https://debtcamel.co.uk/two-bad-credit-cards/ After 6 months – a year with no problem debts with balances and some positive marks, your score will be improving, but it’s never going to get to good while the defaults are there. You might want to think if that credit card default should actuallt be older, so it would drop off sooner? See https://debtcamel.co.uk/debt-default-date/
I assume your lump sum is coming from payday loan refunds? Yes, you can offer full & final settlements, see https://debtcamel.co.uk/debt-options/less-common/full-final/
vicky says
Hi
I had a gas/elec bill that went to a debt collection agency who put it onto my credit file. I didn’t realise i had this. When I did i was going to clear it but an advisor at experian told me to make monthly payments as this was now a delinquent account and it would be worse to clear it.
My credit rating is now worse than ever, i was doing really well. My IFA advised that the payment plan is the issue on my credit file and that if I pay it my rating will go back up.
Its showing as AP on my credit file. Any advice would be great, i will just pay it off. Can i ask them to remove the account from my file?
Sara (Debt Camel) says
That was most peculiar advice from Experian. The sooner you may this off, the sooner your credit rating will start to recover. How long ago was the first problem?
Vicky says
Hi Sara,
It must have been summer 2015, it was being sent to my old address. When it did get sent to my house I called up after the advice from experian and set up a payment plan. I can clear this for £476. It’s showing as AP and my IFA seems to think if I pay it my rating will go back up.
I’m unsure of what to do. I pay everything on time but as of late I can’t get credit but I’ve had this in place for 6 months. Can I get this removed? I’m unsure of what is best.
Thank you
Sara (Debt Camel) says
I think you will find it very hard to get this removed. If you had informed the utility company of your change of address AND you had paid the bill in full as soon as you became aware of the debt, there there would be some a case for it. But there is no good reason why the AP markers should now be removed as you did set up an arrangement to pay.
The best thing to do now is to repay the debt in full asap. It will take some time for your credit score to recover.
Sherry says
I had an overdraft with first direct which due to losing my job through illness I couldn’t reduce. We reached an agreement to repay at £10 per month which I have paid. In April this year the first direct account was passed to HSBC and I was given a different account number to pay into which I have done. When j checked my credit file it is showing as a default each month since April although the balance is shown as reducing. Can I get this default removed and if so how? I feel this is really unfair and I would be extremely grateful for any advice you could offer me
Sara (Debt Camel) says
Hi Sherry, it may feel unfair but to a creditor it is accurate. Only the first default matters, the others don’t count to your credit score.
The fact you are making regular repayments doesn’t make a difference I am afraid – it does have the positive effect that HSBC are much less likely to consider getting a CCJ.
If you have other debts as well, it would probably be a good idea to get some debt advice unless you are expecting to repay them in the next few years? See https://debtcamel.co.uk/debt-options/ for the options and which to look into in more detail.
Sherry says
Thank you for your quick reply. Why is it a default if I am repaying as agreed. I’m sorry I don’t understand and the bank don’t explain.
Sara (Debt Camel) says
An overdraft is usually repayable on demand :( If you had to contact your bank to make an arrangement to pay a certain amount each month in order not to be charged fees, that counts as a default on the original terms. If you feel it is unfair, you could ask them to remove it, see https://debtcamel.co.uk/debt-default-date/ which looks at changing a default date, but the principle is the same if you want a default deleted.
Sherry says
Thank you so much for explaining
Andy says
I have several defaults on my names totallaling £8000. When I was young like everyone else I ran up the debts spent the money and never paid back and still another year or 2 to go before the 6 years is up will my credit score automatically raise when there get taking off my file andy
Sara (Debt Camel) says
Well yes … unless the creditors take you to court for a CCJ in which case it is wrecked for another 6 years. See https://debtcamel.co.uk/no-calls-or-letters-about-debt/ for more information.
Binks says
Hi,
I currently have a poor credit score (probably due to borrowing)
Currently owe:
£13000 car finance
£5000 on credit cards
I will have cleared my credit cards balances by April but car finance is ongoing. We’re hoping to buy a house in 12months. I have no defaults or CCJs and no late payments within the last 2 years.
How can I improve my credit rating enough to get approved for a mortgage in 12months time?
Sara (Debt Camel) says
Twelve months of careful attention to your credit record should help a lot. Make sure you overpay the minimum on every credit card until they are cleared. Close all cards except for one – this will ideally be one with a low interest rate (in case you have to use it) and also the one that has been open the longest and one with no missed payments at all. When it’s clear, use the card every month for something small and repay it in full. Make sure its credit limit isn’t huge – less than 3000.
Klee says
Hi. I have recently considered entering into an IVA to consolidate all my debts into 1 Monthly affordable payment. My current outstanding debts are in the region of approximately £6000. These include such things as bank overdrafts and personal loans. My current credit score is very low as a result of these debts being in default. However, I am looking to buy my rented property in the near future therefore apply for a mortgage. I was under the impression that paying off these debts through weekly payments in an IVA would improve my credit score, however i have recently been informed that if i enter into an IVA my credit score will not improve until after 5 years, even if i settle my IVA early. Is this correct? And if so, would settling all my debts without an IVA and rather with lump sum payments give me a better chance of an improved credit score and ultimately a better chance of getting a mortgage?
Sara (Debt Camel) says
An IVA will wreck any chance of a mortgage for 6 years from the date it starts – this applies even if you pay the IVA off early! If you can repay your debts by partially settling them, your credit score is likely to improve before then, as the defaults will drop off your record 6 years after the default date – have a look at your credit file in detail and see when that would be!
An IVA is a form of insolvency and it has the same impact on your credit file that bankruptcy would have. In fact worse from the point of view of getting a mortgage as with bankruptcy you don’t have to make payments for 5 years and so you will be able to save a larger deposit, see https://debtcamel.co.uk/bankruptcy-iva-dro-credit-rating/ for details.
Nadia says
Hi Sara,
I had a electricity bill of 243£ that was put it onto my credit file in 2013. I didn’t realize I had this and found out when I tried to get my credit score on Noodle. It was a final bill that I wasn’t in agreement with, however I did not have any written letters/follow up.
My credit rating is now worse than ever, and I am trying to add myself to a mortgage. I am ready to settle to have this away, however I would like to remove it as default. if you can please advise.
Sara (Debt Camel) says
It is very hard to dispute a bill now, so long after. You need to complain in writing to the electricity company and then take the complaint to the Ombudsman.
If you are resigned to paying it and just want the default removed, same procedure. May well not work as you didn’t complain at the time. But here you also need to pay it asap, as mortgage lenders will be more prepared to consider you after the default has been settled for over a year.
Mandy says
I am helping my brother sort his finance following him having a breakdown after a messy divorce and loss of business.
He has a CCJ for £1800 which he is paying back at £10.00 per week – a loan £16000 which he should pay £350 a month for but because of his situation the bank have accepted a payment of £130 per month for 6 months. He also has a credit card of £8000 which he should pay £180 per month but company have accepted a reduced payment of £60 for 6 months. He has an overdraught of £10000 which he uses to pay his bills each month. He has not missed any payments in the last 12months to anyone but his credit rating is still showing as very poor.
My question is he has received a tax refund of £2000 would it be best for him to use it to pay off the CCJ. overdraught or make a lump payment to loan or credit card to improve his score quicker?
Thanks
Sara (Debt Camel) says
That is a LOT of debt. Is he buying or renting? Is he ok with all the priority debts – rent/mortgage, council tax etc?
Rick says
Back on 2010 I start a direct debt to buy a mobile phone and after few months I find myself without a job (money was really short) and my account was very low, for the reason of no money enough I missed one payment.
I with my innocence, I thought that this past month would be debited in the next month or when money start come trough again into my account but this took time to happen, because of my situation I had to move house then about four months later when my first salary from a new job dropped into my account i was hoping that there would be a charge for late payments but it didn’t happen.
Than I thought let put my financial situation set up and after I will fix this problem but I was letting time pass (stupid me).
I haven’t get in touch with they not even them with me, to pay my debts and I had moved house again few more times.
Anyway I get in a better situation and I check my credit with equifax this week and it’s show…
Communication supplier from Cabot financial (Europe)Ltd
Defaulted £437
Start date . 05/2010
Defaulted date. 02/2011
Date update. 04/2013
I read a lot about the subject that makes me more and more confused, so my questions are…
Waiting for them to contact me or do I contact them? By phone,email or letter?
Since they did a trace enquiry on my last address 10 months ago. if Cabot start a CCJ they now know my current address right?
The final debt I owe is £437 that appears mention above or this may have increased with interest and fees?
It is better to wait a few more months to complete 6 years and begin SB?
They have the right to apply default after 9 months from the last payment, correct would not be between 3-6 months?
If Cabot or I start a deal negotiation I have the rights to request the CCA before agreements?
ps. I don’t know if relevant or not, the beginning of 2013 Barclay’s block my card and send me a new one without the old one expire I didn’t bother in knowing why.
Sorry to make it long and ask so many questions I just want to be clear to you and be sure before i move on
Sara (Debt Camel) says
As Cabot now know your address, the chance of this getting through to being statute barred is pretty low. See https://debtcamel.co.uk/no-calls-or-letters-about-debt/ which looks at this situation in detail and what you should do.
Yes the default date should be 3-6 months after your first missed payment, see https://debtcamel.co.uk/debt-default-date/.
CCA is not relevant for this sort of mobile debt. I don’t think the blocking of your credit card is relevant.
Mr Smith says
I have roughly £3k debt i am in a position to pay it all off but looking at my credit reports there seems to be a payday loan which is spiralling upwards of £2k the original loan was £400. Will i have to clear this £2k i have had no communication from the company in question regards the loan but they keep adding the interest.
I have no idea what to do with this situation. I was wondering if i could contact them and offer to settle the original balance which was £490 when i took out the loan around 3 years ago for some unknown reason to myself and forgot about it as i moved house.
I’m in limbo with it as they haven’t bothered to contact me through the years and the amount of interest is ridiculous.
Sara (Debt Camel) says
who is the lender? had you borrowed from them previously?
Pam says
Hi I have a credit card £4500 and a store card. I have paid this off today. However my credit rating is still very low. I need to buy into a mortgage now and scared these will effect my credit rating? How long will this debt be cleared off my history? I have missed two payments of my barclaycard but did not show up on my history? And also 2 payment of my store card, this showed up. My husband has just left me and I have been left to pay the mortgage the bills and debt on my own working pastime and two children to feed. Can some leeway by taken into account and these defaults taken off my credit history in order for me to purchase our property in my own name?
Sara (Debt Camel) says
Hi Pam, I don’t know how large a mortgage you want or what you earn, but it sounds to me as though you may be rejected because the mortgage company will think the mortgage is unaffordable, whatever your credit score is. You could talk to a mortgage broker about your situation.
Clare says
Will getting a small loan improve my credit rating? I have never had to borrow money, I don’t have any credit cards or student loans or anything at all like that. but as a result of that my credit rating isn’t very good, if I was to get a small loan (say £1000ish), would it improve my credit rating once it was paid off?
Sara (Debt Camel) says
Yes, but it would cost you money in interest – if your credit score isn’t good, you won’t get a cheap loan! A better approach is to get a credit cards and use it for some small purchases and repay it in full each month. That way you don’t pay any interest and your credit score should improve.
Sarah says
Hi.
I need some advice please.
I have some defaults about 6 too be exact. These have been on my account for a few years and i am currently now paying them off monthly they will all be fully paid off in 5 years. I do have debt also which i have never missed payment on but because off these defaults its making my credit report really poor. Although it will take 5 years to pay off i was hoping to apply for a mortgage in around 2 years time. Will my score ever improve over this time? Or will it only improve when they are ALL fully paid off? I have been paying them for 6 months now and my report doesnt seem any better its still the same.
I just dont think there is any light at the end untill 5 years time and.
Thanks in advance
Sara (Debt Camel) says
You have little change of getting a mortgage whilst you have unpaid defaults on your credit record. Even when the debts disappear, 6 years after the default date, the fact that you still have unpaid debts will be evident from your bank statements. If you have a deposit for a mortgage, you should consider using some of this to clear your debts, then save to build up your deposit. See https://debtcamel.co.uk/dmp-mortgage/ for details.
Samuel McAllister says
Hello
I recently paid off a £66 bill to Lowells. Lowells defaulted my account in 2015 which my credit report went down as expected. I paid the £66 off in full after disputing the bill In December 2016. My first update Lowells has changed the status to fully paid but my Equifax report has nose dived even worse than the original default! I was under the impression that if I paid a default in full this is meant to help my credit score not damage it! Can you tell me what’s going on? Am confused. Thanks in advance for any reply!
Sara (Debt Camel) says
Well I can’t guess what else is happening on your credit record, but paying off a default will not cause your score to nose dive!
Samuel McAllister says
Thanks for your reply Sara. I’ve had a good look at my credit report and there is nothing else onit to have a negative affect. Could it be a mistake byou Equifax? I’ve contacted Equifax also. And one can again thanks for taking time out to advise me
Fay Rowley says
Hi Sara,
I currently have a credit score of 823 on Experian (which is fair) I have had no default payments on my account for 23 months the last one being in March 2015 on some credit accounts. I paid off the debt and in July 2015 I got declined for finance on a car. I am looking to purchase another car on finance would I be accepted for finance at the dealership on this. The only negative factor on my account was my default payments before March 2015 and I have had non since.
Thanks in advance.
Scarlette
Sara (Debt Camel) says
You are now in a better position as the default was repaid. Anecdotally PCP car finance requires a better score then HP.
Tariq Iqbal says
Hi Sara – been reading your responses which I find very informing and useful – thank you.
My colleague Paul moved address approximately 4 years ago and in the meantime forgot about a £150 credit card payment he should have made. It was always sent o his old address which had been subsequently rented out by the new owner and thereby post was never forwarded to him. As soon as he was made aware of the default (which took a few weeks/months I think) he paid it in full as he actually can afford it and it was a genuine mistake.
Unfortunately he has found this on his credit report and it is affecting his ability to get any form of commercial loans or even a residential mortgage.
I note your advice in previous posts re waiting for 6 years (so in this chaps case another 2 years-ish). Is this set in stone or is he able to inform the credit agencies about the nature of the default, the amount and that it was a single payment as opposed to a regular payment missed many times – thereby improving his credit rating?]
Many thanks and kind regards
Tariq
Sara (Debt Camel) says
I think he is going to have to come and ask himself. It depends if a default was registered or just missed payments. And whether he has repaid the whole debt, so it has a zero balance.
Simon says
If i can give you a quick rundown on my circumstances: My credit score is extremely low (175 at last check). I have mortgage arrears, 1 CCJ and 4 defaults on my file. The Mortgage arrears were initially £14,000 but have been whittled down to £1500 as of this month. I have paid three of the four defaults off in full, which now show zero balances on my experian report, and I have been paying £50 off the CCJ (£1000) off every month from the moment it was registered. It will be cleared in August 2017. Two of the four defaults should drop off my file this year, the first in July and the second in October. The last one will not drop off my file until 2019 and the CCJ will be on there till 2021, but there will obviously be a certificate of satisfaction to show that it has been paid.
I don’t have any other credit like credit or store cards, and no catalogues or loans. I have several mobile contracts that are paid in full every month, and home telephone and broadband which is also paid on time every month by direct debit.
I will be paying more off the mortgage arrears as of this month, which will mean that they will be paid in full by May 2017.
My question is, how long will it take for my credit score to increase once the mortgage arrears are paid off?
I realise of course that it wont be excellent until after 2021, but i wanted to know if it would improve enough to remortgage next year?
Sara (Debt Camel) says
I don’t think you are going to be able to remortgage at anything close to a reasonable rate until your mortgage arrears, the CCJ and the default with a remaining balance have all be cleared for at least a year. So no, that is not going to be next year.
Once they are all cleared you need to get a “bad credit” card, use it each month and repay it in full each month – this will start getting some positive markers being added to your record. See https://debtcamel.co.uk/two-bad-credit-cards/ for more about this.
Hattie says
Is it still worth paying off a debt in full if it has already been defaulted? Does it make any difference to improving your credit score in the long term if you pay the defaulted debt off in full or offer a settlement figure?
Sara (Debt Camel) says
Paying a defaulted debt starts the slow process of improving your credit score as the article above explains. This https://debtcamel.co.uk/ff-credit-record/ looks at your question about how a partial settlement affects your credit score.
Hattie says
Thank you for pointing me in the right direction for the necessary information. So, if a balance is quite low and you still have 4 years left before the default is removed, it’s probably best to pay the full amount as quickly as possible rather than offer a f&f settlement? Would this be better in terms of the likelihood of being able to get mortgage eligibility options sooner?
Sara (Debt Camel) says
Well if you only owe £100, then it questionable whether it’s worth going for a partial settlement that till show for many years.
It’sbest to settle the debts as soon as possible. So by the time you make a mortgage application the problems are clearly in the past. Don’t try to save for a deposit and at the same time pay the debts of slowly. better to clear the debts then save faster for a deposit.
Hattie says
I would also like to ask, if able to pay a lump sum of debt off, would it improve a credit rating more quickly to settle the balances of defaulted debts first before those debts which are currently ‘happy’ with the regular payments being received through a DMP? (As in payments higher than the minimum amount requested which ‘in theory’ should keep defaults at bay?) OR is it better to settle debts which haven’t yet defaulted (before they possibly could default you?)
The defaulted debts are through my DMP which I have been on since 2013. The most recent default on my credit file is May 2015 which I’m aware will stay on file for 6 years. I recently took 2 debts off of my DMP to deal with directly and have been making increased payments to avoid any further defaults which were threatened (which would have delayed future mortgage plans for even longer!) I have paid one of these off and have one remaining debt separate from my DMP which I am paying as much as possible off of in monthly payments. On my DMP, I have 2 defaulted debts and one debt which hasn’t yet defaulted (which I am paying above minimum payments for). I hope to pay the debt not included on my DMP first within the next few months, I then was wondering how to prioritise the remaining debts on my DMP (defaulted or not defaulted??) as my parents are planning to gift me some money (not the full debt amount) as the end of my DMP is finally in sight which is why I asked the questions in my previous comment. I really want to take the best possible steps to start improving my credit file for the future. I hope that makes sense?! Thanks
Sara (Debt Camel) says
This is a mess and simple rules of thumb aren’t going to help you.
What should have happened is that all your debts should have gone into your DMP in 2013 and stayed in the DMP. They should all have had default dates added in 2013/4. Instead you have allowed yourself to be bullied by some creditors into paying them more, which is delaying the date all your debts will finally be gone and you can start saving for a house deposit. By trying to avoid defaults on some debts you may not even have improved your credit score as they probably show late payment and AP markers. These will continue to show from 6 years after the debt is settled. It would have been much better for getting a mortgage in future if they had defaulted and then they would be dropping off in 2019/20.
I think you should go to your local Citizens Advice with:
– details about all your current debt,
– an income and expenditure statement to work out how much you can afford to pay each month,
– the amount you may be getting as a lump sum and
– a copy of your credit record.
They will be able to help you look at what your options are. It may be that some debts should have their default date changed to be earlier so they will drop off sooner. It may be you can ask for default dates to be added for other debts which don’t currently have them, see https://debtcamel.co.uk/debt-default-date/. Once you havea plan for those, you can look at what your options are for the lump sum – it may be that it is better to clear some defaulted debts with a full and final settlement, see https://debtcamel.co.uk/dmp-partial-settlement/.
Elaine says
Hi, I have just finished paying off my credit cards in full thinking that this would improve my credit score. however I was stunned today when my credit report went down by 50 points and the only change was the first of the credit cards I paid off showing a zero balance. When I checked further the credit card company closed the account when I paid it off it was not in default and payments were up to date for the last 16 months (I had missed some payments before then but never was more than a month behind) my question is will my score keep dropping as the 2 other cards I paid off show a zero balance next month and if so how can I better my credit score? I have a mortgage which has been paid on time and have no other debts.
Sara (Debt Camel) says
Your score would have dropped because the account was closed. One missed payment doesn’t add a big penalty and you would probably have got a larger positive by leaving the account open if you had the choice. In the long run having the account closed is good though as the missed payments will eventually disappear without trace.
The other two cards, were there also missed payments on those?
Elaine says
1 had 1 hasn’t got any missed. Would you recommend applying for a new credit card and using it for small amounts and paying it off each month to improve my score?
I will be lookin to apply for a mortgage in January of 2018.
Sara (Debt Camel) says
No reason to get a new card, just keep the one that you have cleared which has no problems as your “real” card going forward. use it each month and set it up to repay in full aytomatically. As your problems get olders, the effect of these will reduce. And repaying a card in full each month gets you extra points. See https://debtcamel.co.uk/credit-score-change/ for some numbers.
Elaine says
Thank you.
Do you think I have enough time between now and Jan to build my score back up? I was hoping to get into the 500 range.
I am on clear score as 371 (after loosing the 50 points)
And 461 on noddle.
Sara (Debt Camel) says
Thats sounds worse than the odd missed payment… what else was wrong in the past?
Elaine says
I had an over credit limit on two of the cards at least 3 times prior to the 16 months. I also had a credit card converted to a loan with set payments which I paid on time until it finished nearly 2 years ago.
Apart from that there is nothing on either credit report.
On noddle I have a 3 out of 5 for lending approval which seems to be good.
However I’m hoping by doing what I mentioned in my previous post will increase my score do you think it will?
Sara (Debt Camel) says
Clearing the credit cards and then using & repaying in full the one with no issues every month is the best thing you can do. No new credit applications. Jan 2018 may be a bit early for a mortgage application.. second half of of 2018 your credit record will be looking better and you will have had over a year with no problems at all. You need to go to a broker, not direct to a bank.
Elaine says
Okay do the mortgage lenders take into account my assets? I have a halve share in a mortgage free tenanted property and only have £20,000 left on my current mortgage although my property is worth £250,000.
The mortgage is to carry out an extension to my existing property.
Beverley Field says
Hello,, I’ve just been turned down for a credit card that I wanted for car hire abroad. The reason is a dispute I have with virgin media over a c ancelleation fee. Basically I gave them two months notice of leaving, small print only said a minimum of 30 days. Virgin say I needed to cancel exactly on the 30 days and now have to pay twenty odd quid to them to cancel. They have put four debt collecting companies on to me and each time I refuse to pay as I feel I do not owe them anything and have requested they take me to court mid they feel that aggrieved. It is of course not cost effective for them to go to court over this. They have never disagreed with me that I did cancel, only that I was too early. They have since put the alleged debt on my credit rating. I don’t really know what to do from here. I have spent hours wr iting and phoning them to no avail. I refuse on principal to pay money that I do not owe. Any help would be appreciated please.
Sara (Debt Camel) says
Have you gone through their arbitration service? See http://store.virginmedia.com/content/dam/eSales/Downloads/Consumer%20Complaint%20Code%20of%20Practice.pdf
Other things that sometimes work in this sort of situation are being a nuisance on twitter @virginmedia and facebook https://www.facebook.com/virginmedia/. Or emailing their CEO tom.mockridge@virginmedia.co.uk
Sindy says
Hi. My husband and I took out a mortgage in 2009. We separated in 2013 and shortly after got divorced. He lived at the property with his new wife since 2013 and I rented elsewhere with my two children. He agreed to pay the mortgage while I had rent to pay elsewhere. In 2014 he renewed the mortgage with my name on it without my consent. I had no idea until 4 months later and for the last 3.5 years I have been fighting to get my name off, fruitlessly. He then stopped paying mortgage, moved out (i didnt know until bank told me to pay up) and dropped me right in the shit. He went bancrupt and my credit rating has gone down. The house is in reposession and has an offer. If the house sells and debt paid off, will my credit rating be restored?
Sara (Debt Camel) says
How large is the mortgage plus arrears? how much is the house worth?
Kathryn says
there is an account on my credit file marked as Closed, EOS solutions have cnow contacted me for payment do I need to pay it?
Sara (Debt Camel) says
Unless you think you have repaid the debt, this has probably happened when the debt was sold by a creditor to EOS. The previous creditor marks the debt as closed and EOS will add a new one, otherwise you would have two open records for the same debt.
In this case, it is a standard debt and you do need to pay it unless there is some other reason why you don’t think you should.
Kirstie says
Ive been in a devt management plan for several years and having checked my credit score ther is a company I am paying off through yhe debt managment that every minth lists me as having defaulted my payment.im waiting ti hear if its because the debt managment company has been paying late every month or whether its because i originally defaulted on this payment in 2008.i can afford to pay off the amount that remains to this particular company in order to stop more defaults but is there anything i can do to change the defaulted payments showing up?many thanks
Sara (Debt Camel) says
Who was the original creditor?
Gabs says
Hi
I have a default on a credit card account from 2013 with Barclays that’s for £461 I thought I had paid it off but I had so much going on back then but I have now done a credit check as I want to buy a house next year. What is my best better to clear my bad credit
Sara (Debt Camel) says
Repay it immediately! See https://debtcamel.co.uk/mortgage-recent-defaults/.
Chris says
Hi
I have several defaults on my file and am looking at proposing a partial write off / repayment rather than a full and final settlement. Have you any experience of that being a successful proposal when the budget is written with todays costs in mind and of course post election and brexit costs are likely to increase. I was thinking of asking them to match my payment amounts.
Thanks
Chris
Sara (Debt Camel) says
how large are the debts? What were the original debts for and when were the accounts opened? how much can you afford to pay across them every month?
Chris says
Hi Sara,
I’ve got £130 to spread between £5707. Most are with collections agencies a couple are listed as being with the original companies still, they range from 77 to 1148. I calculated 43.5 months to get to 0 unless, like United Utilities they match me £ for £. Cabot and Lowell have both suggested in letters they’d be open to something and I guess this is because they paid pennies for the debts, many of which are over 3 years old now. They’re mainly catalogue or home collected loans, a couple are overdrafts and communications providers
Sara (Debt Camel) says
The concept of “matching” is used by some utility companies, but not normally for consumer debts.
You can often get a debt collector to agree to accept say £100 a month for the next 6 months as a partial settlement on a £1200 debt without confusing the issue by talking about “matching”. I doubt whether any creditors would be interested in a proposal to have a low amount for several years. And it doesn’t sound as though you are confident that you could maintain the repayments anyway if you are worried about your expenses going up.
43 months in debt management doesn’t sound too bad. You may be able to speed it up if you can get any money to make F&Fs with, for example PPI refunds. see https://debtcamel.co.uk/ppi-out-of-debt/.
The catalogues – were any of these accounts opened a very long time ago? Doorstep lending – if you used one lender for a long time, think about whether the loans were “affordable”, see https://debtcamel.co.uk/refunds-catalogue-credit-card/.
Nat says
Hi sarah
I have 3 defaults with Nationwide totalling £9500, they are from 2013 and 2014. Nothing else is outstanding and I’ve had no credit since, just mobile phone and utility bills which are always paid. My partner and I want to apply for a mortgage this winter. If I settled those defaults now, what are the chances of being accepted for a mortgage in 6-8 months time? We would have a deposit of around 85k.
Sara (Debt Camel) says
Your chances aren’t good for this winter. Most mortgage lenders require you to have settled all defaults at least a year before getting a mortgage.
Also read https://debtcamel.co.uk/dmp-partial-settlement/.
Amrita says
Hello Sara,
I have a quick question, so I moved from a direct debit to paying my telephone bill manually, but due to personal circumstances and moving I missed the last payment, that has accrued to £91 pounds and is currently defaulted. I wasn’t aware of this until I did a credit check and it came out low. It has been one year I am intending to pay this on friday, but I want to open up a community bank account where they do a credit check with Experian, if I explain my circumstances will I still be able to? I am really concerned about this.
Many thanks
A
Sara (Debt Camel) says
I’m sorry but I can’t predict what decision a bank would make in this situation. Could someone else open this account?
Ben says
Hi. ive just paid a £1200 debt of this morning at a solicitors ive had, they told me the debt would be down as settled on my credit report within 30 days, ive still got 2 years until this will clear off my report. could i get in touch with clearscore to see if it could be cleared earlier? Thanks
Sara (Debt Camel) says
No. Well not unless there is a reason you can argue the default date is incorrect and should be earlier – in which case you need to talk to the creditor who added the default date, not clearscore.
Dean says
Hi there
I have £12k of overall debt, £3000 of which relates to a guarantor loan – which is always paid on time each month.
I have 2 CCJs totaling £900, then several defaults making up the remaining £8k.
Most of this debt is over 2 years old (some of which defaulted when I moved house and missed letters – even though i should have been on top of the issues anyway; ignorance is bliss as they say).
Anyway, if it takes 6 years for the “marks” to be removed regardless as to how quickly I pay it off, would the IVA option be a safe option?
We want a house within the next 18 months and can easily save what we need between us in that time (as both our parents will be assisting also). Her credit rating is fine, but obviously mine is not.
I have seen some Brokers state that as long as all debt is “satisfied” and IVA repayments are never missed and always on time, then a mortgage is still possible. Or something along those lines anyway…
That said, having spoken to a Debt Relief company already, they said that to be on an IVA, the Guarantor Loan would need to be included which would mean my Guarantor would then be chased. I do not wish for this to happen and would prefer to continue paying this off as i have been, and then pay the IVA installments on top.
Can you offer some advice please?
Sara (Debt Camel) says
An IVA would be a disastrous option. You cannot get a mortgage when you are in an IVA. Or whilst the IVA is still showing on your credit record, which will be 6 years from when it starts. I don’t know what brokers you are talking to but I suggest you ignore them. And it is not possible to leave the guarantor loan out of an IVA, nor will an IVA leave you with enough money to repay a guarantor loan.
It sounds as though you are now in a much better financial position. Your debts, including the guarantor loans and the CCJs and the defaulted debts need to be repaid in full if you want to have any chance of a mortgage within 6 years.
The guarantor loan will not be harming your credit record, so I suggest you just carry on repaying that and throw all extra money at repaying the CCJs and defaults. After that is done you can start saving for a house deposit.
You may be able to get a mortgage 12 months after all the problems on your credit record have been fully repaid.
Paul says
Hi
Please can someone help, when I was younger I was terrible with money but decided a couple of years ago to sort out my credit.
I paid off all old debts that I’d ignored for years, last year I got through a ccj for a debt from years ago that accumulated from 1 missed direct debit and accrued massive charges.
I’d totally forgotten about the debt until the CCJ came through and that wasn’t even on my credit report. The CCJ was for 1,000 when I received it I arraigned payment for the full amount in instalments. I made the final payment in May/June and since then my credit report has dropped 60 points (Clearscore).
Does anyone know why this would happen? I’m gutted, I’d got it to 310 which isn’t amazing obviously – but it was growing and took a while to get it there.
I’m wanting to buy a house and this has set me back years, I don’t know where to turn.
Thanks.
Sara (Debt Camel) says
That is a sad story. It is a shame you couldn’t have paid the CCJ within a month, then it would have gone from your credit record. But now it is there until 6 years from the date it started. There is nothing you can do to change this.
Your credit score won’t have dropped because you repaid the CCJ. Something else has happened on your credit record tomcause that – are you now using more of a credit card limit?
Your credit score will gradually improve as the defaults get older and then drop off but its not going to get to good until the CCJ goes.
Re a mortgage, all you can do is make sure nothing goes wrong from here and keep saving. After say 3 years if there is nothing else wrong on your credit record at all, absolutely nothing, and your deposit is 10% or more, you could try talking to a broker about a mortgage.
Christina Smith says
Please can you help. My son has paid off all his credit cards and closed all his accounts only to find to his horror that his credit rating has plummeted. What can he do – his credit history was perfect before doing this and it seems as though he has been severely penalised for settling his debts.
Sara (Debt Camel) says
He could phone one up and say he has changed his mind and could they reopen his account? Then use the account once a month and replay it in full each month, don’t leave a balance. This is the best way to keep a good credit rating.
Kris says
Hi Sara,
What a great website to make debt less scary!
I am hoping you can offer some advice? I entered into a DMP in 2011 as a result of redundancy. After almost 6 years of dutifully paying into the DMP I have found myself in a position to partially settle my debts. However as I would like to repair my credit file ASAP I have a few questions that I am struggling to get a straight answer to. I have not asked the companies if they will accept a full and final settlement yet but I will soon have approximately £10k to offer them and the total debt is £14k
Questions:
a) As I hope to be able to apply for a mortgage soon, should I ask the bank to change the default date on my credit file for the one that shows a default in 2015?
b) What would be the risks of partially settling these debts to my credit file- i.e. would it be better to wait until I can pay in full? – I assume anything marked a default on my credit file will drop off after 6 years?
c) Is there anything else I should do or be aware of before contacting stepchange to organise a payment?
Hoping very much that you can help – many thanks in advance.
Regards
Kris
Sara (Debt Camel) says
What are the current default debts on each of the debts in your DMP? You are presumably making quite low repayments at the moment? Who are your creditors And were any of the accounts opened a long while before 2011?
Sam says
Hi
Me and my partner currently have approx. £20,000 debt which occurred in 2013/14 when my husband became self employed and wasn’t paid so we relied on credit to pay our mortgage and live on and other commitments like loans weren’t paid. We have around £100,000 equity in house but obviously cant re-mortgage because of our very poor credit file. Our parents have very kindly offered to pay the debt on the basis that we can re-mortgage and pay them back. My question is how long after we have paid off the debts would we be able to re-mortgage to pay them back. I believe there was defaults for some of these debts but we haven’t missed a payment for 3/4 years.
Sara (Debt Camel) says
You need to look at your credit records and find out the date of the defaults.
Also could your parents get a 0% balance transfer to do this? Then you could be paying that back rather than remortgaging?
Ashley says
Hello.
I have two defaults on my account one with halifax which has been in defualt 1st of march 2017 and the other provident which was opened not even a year think it is in default from january.
I have two other loans which are paid on time ie one being my contract. They have ticks beside them (totallymoney)
If i pay these off in the next few months what are my chances of getting a morgage in 2 years time or so?
Any advice on building my score would be appreciated very much.
Thank you
Sara (Debt Camel) says
To get a mortgage you want both defaults paid off asap. That won’t increase your credit score, but mortgage lenders don’t care about that number, they care about the details of your history. At the moment there are lenders who will give you a mortgage at an ok (not top) rate if all your defaults are over three years old (so that will be in 2020) and they have all been paid of for a year or more. You are also likely to need a deposit of 10% or more.
Mich says
I’ve borrowed loans and couldn’t be able to pay when it was due but I’ve started paying them back every week. I’m 22 and trying to get a mortgage well I would want to start saving for a mortgage and put down deposit before I’m 25. If my credit score improves would I be able to get the mortgage. I don’t drive neither do I owe a car
Sara (Debt Camel) says
You need to pay off the problem loans asap, as a mortgage lender will want to see that all your money problems were as far in the past as possible. Paying them off won’t actually improve your credit score but it matters a lot for a mortgage application.
Tracey says
Hi I’ve just recently paid off all off my debts (all off my credit file ) some not ,all on my file where in default bar 3 ,they where in arrangements ,all creditors have sent me a zero balance letter, just wondering how long does it normally take for my file to be updated and how long does it normally take for my score to improve ,I took out a guarantor loan to pay my debts off would this affect my score too or would it improve it when it’s paid each month ? T.i.a
Sara (Debt Camel) says
Paying these debts won’t actually help your credit score at all. It will get gradually better as they age, then improve when they drop off 6 years after the default or 6 years after they were settled. But this would have happened even if you hadn’t paid them off.
I am very sorry you took out a guarantor loan to do this. I hope you can repay it as fast as possible as the interest rate is probably horrible.
Paul Hedge says
Hi,
I wondered if you could help me.I have been on a DMP since September 2014,and in that time I would say that I have done really well,clearing over £16,000 of my debt. I have £7,700 remaining.The problem I have got is that my partner is now pregnant and we would really like to move.We have spoken to a letting agent who has told us that our credit score would have to be 545 in order to pass the credit check.My credit score is 510,and my partners is 537. Is there any way we can improve our credit scores in the near future? Would it be beneficial for me to get a credit builder credit card? The property we live in is unsuitable for our baby,but now we feel like we are stuck with no solution in sight
Sara (Debt Camel) says
I guess you have defaults and arrangements to pay on your credit record. Getting a credit builder card will make very little difference to your credit score, and indeed as with any new credit it is likely to decrease your score in the first few months.
I think you need to be talking to other letting agents or try to find landlords who let directly – they can often be more reasonable. If there is a relative that could act as a guarantor, that would help.
Paul Hedge says
Hi Sara,
We have relatives who can and will happily stand as guarantors,however we have been told that with credit scores as low as ours,that we would fail the credit check and be unable to get help from guarantors as a result of such a low credit score. Would paying one of my defaults off in full help affect my credit score?
Many Thanks
Andrew MacTaggart says
Hello,
I have a defaulted bank account and a defaulted credit card that I took out when I was younger and got myself into. Spiral of debt I ignored these high street accounts and focused on my payday loan debts.
The high street bank actually stopped chasing me pretty quickly and it’s been left like that for a few years now. But obviously the balances are having massive affects on my report, it is nearly coming up to 6 years since I defaulted on the account October 2018 however I have decided it would be best to get the accounts settled and removed soon as.
At the time I defaulted I had serious debt from payday loans which through your help I have learnt I can get remove and refunded due wrongful miss selling.
My question is if I approach the high street firm asking for them to remove or write off the accounts would they? Would they accept a reduced settlement offer? Will they be forthcoming or demand the full balances plus interest and rechase me through whatever methods if I speak up ?
Basically your advice would be great and if you have any templates I can send?
It is a defaulted credit card and a defaulted current account overdrawn. Both with the same bank.
Thank you
Sara (Debt Camel) says
Banks would normally have sold these debts by now – are you sure they haven’t?
If they are still with the original lender, then it is VERY unlikely they will agree to remove or write off these debts. Payday lenders are doing this because you can show their loans were unaffordable, not just because they are old.
It is likely they would accept a partial settlement, but you may need to be able to show that you can’t afford to settle the debt in full.
Andrew MacTaggart says
It is on my credit report as national Westminster still so would this tell me they haven’t sold the debt ?
I did have Westcott debt collectors chase me for this debt on their behalf many years ago but not heard anything in years.
End of the day I need to improve my credit score and these are impacting significantly, what would your advice be ? I know defaulted accounts leave my report after 6 years but does this mean the debt is also written off ? Or would they continue to default me ?
Any advice or info into how it all works would be great!
Thank you
Sara (Debt Camel) says
Read https://debtcamel.co.uk/no-calls-or-letters-about-debt/ as that looks at your situation.
Hattie says
Do payday loans have a big negative effect on your credit score? why would this be?
Sara (Debt Camel) says
Payday loans which are repaid on time don’t harm your credit score. BUT they may result in new applications for credit being declined because loenders don’t actually use “your credit score” to decide whether to lend, they all have their own internal criteria.
If you still have payday loans, other lenders care about these for two reasons. First because the repayments to these lans are often high, so if you are repaying those, you may struggle to pay the new credit you are applying for. Second because they are a warning sign that you have big financial problems, because no one takes out a payday loan if they haven’t!
If the payday loans were in the past, then fewer lenders will care. Most mortgage lenders won’t lend if you have had any payday loans in the previous year. If you want a mortgage and you have payday loans showing put paid off on time, you need to talk to a broker about who to apply to.
lenders see the fact you have had payday loans is a sign you were struggling and that may mean they turn down a credit application from you.
Aidan Mullan says
Hi sara
I have a defult on my credit file which was paid off in full September 17 I also have about 6k of credit card debt which I hoping to be able to clear in the new year should I clear it in full or stagger the payments will my score go up quicker if do it all at once or stagger it Ive never missed a payment on any of my cards and also wanting to go for a mortgage of 36,000 it’s a small 1 is there a chance with the defult on my account?
Sara (Debt Camel) says
I would pay the credit card debt off in full – your credit score gets a boost when it is down to zero. But don’t close the card – leave it open and then use it for something small each month and then repay it in full.
That is a very small mortgage – talk to a mortgage broker about your chances with a default that recent.
Stephen Davies says
I am a little confused, hope you can help. In 2011, I went onto a debt management plan due to some difficulties I had had with loans and cards. In September 2013, I was able to pay off the whole amount which I was happy about obviously, but assumed my credit rating would be dreadful for a good while. I have not had need to check my rating for a while but checked today and on Experian it is 971. I am pleased of course, but being naturally cynical I have to wonder if when I come to move house (as we plan to soon) they will unearth my previous bad behaviour and I will be refused. We have a good deposit (circa 60 to 70k) and my wife has exemplary credit… what do you think? Is it worth asking a broker in the first instance?
Sara (Debt Camel) says
Your credit score has jumped so much because it sounds as though all the loans in your DMP were defaulted back in 2011 – they would then have dropped off in 2017, 6 years later.
It’s worth checking your other credit reports, Equifax and Call Credit, see https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to do this. But hopefully they will show the same.
Assuming they are all clear too, then the only way a mortgage lender will find out about your previous problems is if you apply to a lender where you previously owed money to them or to another part of their group. So don’t do this! Don’t apply to Halifax if you owed money to Lloyds for example.
Yes, it’s a good idea to go through a mortgage broker and do tell the broker your past history, or they can’t help you. Mortgage brokers can generally make the process of getting a mortgage smoother, they aren’t only for people with problem debts. Talk to a broker before you start to look at houses and don’t let the estate agent tell you you have to go through their broker.
Stephen davies says
Hi Sara, thanks so much for this info, I’ve had more info today than I’ve gleaned in days, nay weeks of asking and googling. You’re a legend.
Carol says
Hi Sara
I have a debt of 16000 to RBS which defaulted in 2013 and have being paying £1 to a DCA since then. I have offered them 6500 as a partial settlement but they have refused as I own a house outright (200k). I am hoping to obtain a mortgage in the next few years. Will I have to repay the full amount which will take two/three years to save even though the debt will drop off my creditors next year. Which would be the best option. I don’t really want to get into an IVA.
Sara (Debt Camel) says
Realistically they would probably accept a higher offer – 80% or 90% say. But with you owning such a large asset, there is no reason why they should accept a low offer.
The fact that it will drop off your credit record next year is irrelevant. The debt won’t be “statute barred” as you have been making payments to it. If you stop paying it the debt collector will be going straight to court for a CCJ.
If you want a mortgage in the next few years then you have little option but to pay this debt off as fast as possible. A CCJ or an IVA would mean you couldn’t get a mortgage for 6 years.
Shane says
Hello.
Me & my partner are looking to buy a home in april 2019.
My credit score is 371 . I have never missed a payment on anything ever. No CCJS nothing
I think it could be how much credit i have?
We owe £7300 on credit card limit is £7500.
Car Loan £1600 left paying that off come April.
Natiomwide loan £1000
We are looking to pay off Car loan in April, Nationwide loan in september & £4000 off credit card. Leaving just £3300 on credit card
Do you think my credit score will go up?
Sara (Debt Camel) says
The high credit card utilisation is definitely harming your credit score, see https://debtcamel.co.uk/credit-score-change/. If you could get it down to under 30% that would help.
Paying off the loans is definitely going to help with a mortgage application because it will make the mortgage much more affordable for you.
Jamie says
Hi,
I have been trying to get my finances in order and had £15,000 worth of debt but have never had any late payments but had two defaults which have been settled since 2013, but last update was in 2014. I have challenged this as I do not fee that an update a year later is satisfactory or a true reflection on my credit report, so you agree?
I’ve also been very lucky as I’ve now paid off the £15,000 worth of debt and closed all accounts, but have kept one credit card open just to show that I’m able to pay off £20 a month to help score improvement. My credit score is currently 405 with Experian, what is the rough timeline for my credit score to reach an acceptable level? I’m looking to get a Mortage in 2020.
Sara (Debt Camel) says
If the default dates are in 2013 these will drop off your credit record in 2019 after 6 years. The later defaults that were added on already defaulted debts don’t matter and don’t affect your credit score.
As a rough rule of thumb you can probably get a mortgage at an ok rate with a high street lender a year after your defaults have been paid off. But if this is close to the point in 2019 when the defaults will disappear from your credit record, it may be better to wait until that has happened as you may then be able to get better mortgage offers.
jay1979 says
Hi All
just a question regarding my default by Santander, does anyone think I can get this removed as I was in a abusive relationship and my youngest son was abducted
Thanks
Sara (Debt Camel) says
That sounds as though it must have been horrendous. I am wondering if you have other financial problems because of your relationship – “financial abuse” is now becoming recognised as a serious problem.
This is an area where letters being written by Citizens Advice can often help – I suggest you go to your CAB and discuss this default and other financial problems you may have.