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?
Matt says
Hi
I paid all my debts off March 3rd ex my mortgage. Currently most of them still show on my credit file. How long until they come off or do I need to do anything for it?
Sara (Debt Camel) says
Debts come off your credit record 6 years after they were settled unless they have been marked as defaulted, in which case they come off 6 years after the default date.
STEPHENHILL says
Iv paid all my debts off am I now allowed pcp
Louise says
Hi Sara, I would really like to move house in the next few years and it would be great if I could remortgage now to improve my situation now but I am feeling very trapped and hope you may have some advice.
Noddle give me 1 out of 5 which is the worst score possible. I am surprised at this as I have some late payments and arrangements to pay which I have stuck to, but no CCJs or bankruptcy or anything like that. I bought my house 15 years ago and for a few months in 2015 I made my payments one day late (after having a baby I was struggling with mat pay). I have arrangements to pay for a catalogue and a credit card as the interest was getting out of hand and I couldn’t afford the repayments but have stuck to the agreement. I have a lot of equity in my house and if I got a good deal on a remortgage I could take an extra £10k, clear all the debts and only have to pay an extra £40 per month. This would save me about £300 per month in total repayments for car, catalogue and credit cards. However I don’t think I will be able to remortgage with a bad credit score and cant clear the bad credit quickly without remortgaging so I am in a catch 22 position. Is there anything I can do?
I cannot afford to increase the repayments. And if I cant do something quickly I will be probably stuck in this house for 15 years. (it will take 9 years to clear my credit card and then another 6 for it to go from rating)
Thank you
Sara (Debt Camel) says
Has interest been frozen on the catalogue and credit card? When does your car finance end and is it HP (so you own the car at the end) or PCP (so there is a large payment at the end that you won’t be able to afford).
Louise says
Yes the interest has been frozen. There is 2 years left on the car. I will own it after two years (no large payment at the end). All payments on the car have been on time so all positives there on the credit rating but if I could pay everything off, I could save interest on the car and improve overall credit rating quicker. Is there any company that will take all of this into account and give me a good rate and improve my monthly outgoings?
I wasn’t looking at extending the term of the mortgage. I haven’t remortgaged at all and my mortgage started at a high rate due to being a young age with no credit history at the time. Back in the day when we could still get 100% mortgages :-)
I only have 10 years left on the mortgage.
Sara (Debt Camel) says
“Is there any company that will take all of this into account and give me a good rate and improve my monthly outgoings?”
Basically no. Any mortgage you could get would be likely to be at an unpleasant rate. And you may well struggle to afford one at all. If you can only make low payments to the catalogue and credit cards, you are very likely to fail the mortgage affordability tests for a 10k larger mortgage.
Also your car will be sorted in 2 years – you do not want to refinance that as a secured loan on your house for 10 years. And you are not paying any interest at all on the other debts, so paying those off with a mortgage is also a risky and more expensive strategy.
But when the car is paid off, you can then start making much larger payments to the other debts so it won’t take anywhere near 9 years to clear them.
Louise says
Thank you , that’s what I thought you’d say but hoping there may have been another (quicker) solution.
I know I could afford an extra £40 per month on the mortgage if I am clearing debt with over £300 of monthly repayments but I suppose banks don’t look at it like that.
Sara (Debt Camel) says
No they don’t :( And the regulator says when they are checking affordability they have to look not just at what the repayments would be now, but what they would go up to if the interest rate rose by 3%
konal says
if i payed off my old debts would it improve my credit score straight away ?
Sara (Debt Camel) says
No. As the article above says, it won’t make any difference at all to your credit score.
BUT it may make it easier to get credit or a mortgage. And it will prevent you getting a CCJ which would be 6 years of more bad news for your credit score.
Sally says
For example if i borrowed 8,009 of money from a family member to pay all everything on my credit file. Would I then be able to take out a loan to pay then back and just have one monthly payment to deal with.
Is this a feasible idea.
Thank You
Sara (Debt Camel) says
So you have a poor credit score now and hope clearing the debts will improve it? then you can get a large loan at a cheap rate?
Can you say why your current credit score is poor – do you have missed payments, payment arrangements, defaults etc?
Or is the only reason your current score is bad is because you are using a lot of your credit card limits and your overdraft?
Ewan Arthur says
Hi, I have £35000 of debt spread over 6 accounts that has been in default for nearly 10 years now and will not be paid off for another 10 years at current rates. If I settle one or two of the more aggressive chasers of the debt, will the other creditors find out? Currently remortgaging and these debts are not showing up in my credit history, so getting quite good offers now, so for £100 increase in my mortgage I can settle 180 of debt repayment and a 90 car loan. If the other creditors find out and demand I up their payments I’m no better off.
Sara (Debt Camel) says
“Currently remortgaging and these debts are not showing up in my credit history, so getting quite good offers now, so for £100 increase in my mortgage I can settle 180 of debt repayment and a 90 car loan.”
Can I be clear, you are remortgaging to borrow more money which you will use for f&F settlements? And some of the creditors have offered F&F settlements?
Ewan says
Hi, thanks for the response.
All of the creditors have at one time or another offered full & final settlements, but I have not negotiated current settlement figures for the 2 debts I am thinking of settling (total circa £9000).
TBH, I’m so used to getting no’s from financial institutions that my idle speculative completion of a mortgage brokers application with additional borrowing was done without much thought of the consequences. I had assumed we would be forced to roll over our existing mortgage again. They practically bit our hands off and within 2 days we had an excellent offer and lawyers had been appointed.
Sara (Debt Camel) says
ok well your debts are old, so if you are thinking of making a good settlement offer to a credit card or a loan debt, you may want to consider asking for the debt collector to produce the CCA agreement for the debt first… because if they can’t, it’s unenforceable in court and you could offer them a MUCH lower F&F 9or indeed just tell them you won’t be paying any more). See https://www.nationaldebtline.org/EW/factsheets/Pages/getting-information/credit-agreement-advice.aspx which has a template letter, note the letter goes to the debt collector not the original creditor and that you have to pay £1.
“will the other creditors find out? ” making a F&F settlement on a debt does not cause it to reappear on your credit record. Of course if you have several debts with the same debt collector, they will know if you settle one of them. Apart from that, no.
“If the other creditors find out and demand I up their payments I’m no better off.” well year you are, because you have settled some of your debt cheaply!
Ewan says
Hi, I sent one of these letters demanding the credit agreement a month ago. The debt recovery agents sent the £1.00 back and promised to provide the details, but I have not seen anything. What is the next step? Do I just withhold repayments until I see it, or now that they have failed to provide the info within 12 working days, can I just tell them to get lost?
Caroline Ayre says
I have paid my debts in full. However, i notice that not one of my creditors have posted a settled/satisfied on my credit file. Continue to update my credit file with ! mark. Do the creditors not have to mark my accounts as settled.
Sara (Debt Camel) says
That’s odd – sometimes one creditor will get this wrong, but not usually several. Have you only recently settled the debts? What credit report are you looking at?
Katie says
Hi
I need some advice
My husband defaulted in a loan of £2000 in jan 2013 and was passed to a debt recovery the original account says it was settled in nov 2014 when will this be removed from his credit score ? Also should it be on his credit report twice once from the original loan company and then once from the debt recovery agency
Thank you
Sara (Debt Camel) says
This debt will drop off his credit record in Jan 2019.
It is normal for it to be reported “twice” when it has been sold to a debt collector. this doesn’t harm him – the original creditor default is ignored when calculating his credit score.
Katie says
Thank you
He has one more default to go which will go in 2020
And 2 late payments that happened in the last 2 months we have now cleared that debt and are hoping that we can get the late payments removed by pleading with the credit company if they don’t go will his credit score still go up when the default go in January
So he’ll be left with 2 consecutive late payments on one credit account that the balance is now zero and 1 default we have applied for a credit building credit card
Will his score go up significantly enough to apply for a mortgage (aip has been denied on his credit score) 330 on equifax
Sara (Debt Camel) says
Has the last default, which goes in 2020 already been repaid?
Katie says
Yes that was paid in 2016 in full was for £158 for a mobile phone
But the missed payment was for a different credit account that when he changed banks his bills go out of he just cancelled the direct debit without starting a new one, and it was registered at his old address (Mums) so he never got the letter to remind him this happened in April and may and we paid it off in full in 2 weeks ago
Sara (Debt Camel) says
OK so with only two defaults showing, yes his credit record should improve next January when one drops off.
If you can get the missed payments removed, I would have thought you can get a mortgage before then. A rule of thumb (I am in the middle of writing another article on this – look out for it!) is that many high street lenders don’t mind defaults which are over 3 years old (tick for you) and which have all been repaid for over a year (also a tick) provided there have been no problems in the past year.
NB you need to go through a good broker, not direct to a high street lender.
sarah says
Hi Sarah
Can I just say thankyou so much for creating this site, I think purely to help other people!
Just on the point above, I have a similar challenge. I have a default sep 14, satisfied jan 16 after a period of financial abuse by an ex partner, along with some payday loans all cleared up since Aug 16. Since then, all my debt is paid off and everything is clear for a good 2 years. However, now I am trying to get a mortgage, and even with a 15% deposit saved it seems my only option is adverse credit mortgages because apparently (according to the brokers) my credit score is too low. My score was fair/poor for equifax and experian when they ran it through their system, however I just checked today and I have now improved to fair/good.
My question is – should I try some high street lenders now myself? Or does their credit score not really get impacted by experian and equifax? On paper (looking at some) their criteria looks like I would pass but this broker says they have all rejected me because of score…
Any thoughts welcome!
Sara (Debt Camel) says
I assume all the payday loans were repaid on time, no late payments or arrangements to pay. Try a different broker – I don’t recommend going directly to a high street lender.
David says
Is it possible to clarify – when you say has the default debt been paid. Do you mean “paid in full” or “partially” through a F&F offer ?. I was interested because you refer to lenders being more open to new lending if a) default debt has been paid, and (b) if it was paid over 12 months ago.
D Conway says
Hi, I’m Self Employed and my business is in a serious growth spell, My earnings have went from £20k last year to approx £105k currently. My problem arises when i apply for credit card/s to rebuild my credit score. Will the huge increase Cause a fraud alert on the application, which means it will be denied?
Sara (Debt Camel) says
Have you repaid all your problem debts?
I suggest you look at LOQBOX as another way to rebuild a credit score, see https://debtcamel.co.uk/loqbox/
Rhod says
Hi Sara
Firstly, sorry in advance for the long-winded nature of this query.
I lost my job in Nov 2017 and as a result I defaulted on credit card and overdraft payments which totalled £15K. I contacted a debt management company about my situation and they set up a proposed payment plan which was due to commence once I had gained and had proof i was in full-time employment i.e. monthly payslip. Despite my continued search for work I was unable to secure any employment which meant my DMP has not commenced and therefore my credit card payments etc and continued to not be paid. I’ve kept in touch with all my creditors who have been understanding but have explained that my debts will be handed over to a debt collection agency very soon. As yet I have not heard anything from any of these agencies but I know that it’s imminent.
Fortunately, I have this week received some positive news on the job front where I am due to start full-time work albeit on a low income in July.
From my understanding, now that I’ve already defaulted on my credit card payments etc, this will remain on my credit record for 6 years regardless of whether I pay off the loans in full or not. As I mentioned I haven’t yet received any calls from any debt collection agency but I do know that time is imminent. Can you give any suggestions on how I approach this conversation? Shall I try and agree a F&F from the outset, and if so what would be a reasonable offer as a starter for 10?
Sara (Debt Camel) says
As it is less than a year after your default, you have very little chance of a low settlement offer being accepted. Unless you have a lot of money available. you need to start making monthly payments to these debts rather than trying for a full and final settlement.
Rhod says
Hi Sara
To follow on from my previous message above, I’m due to receive a little windfall of approx £5K over the next few months which I intend to invest in an small online business in an attempt to secure a longer term brighter financial future i.e supplementing my income initially and then replacing it and more in the next 12/24 months, rather than using it all to pay off some of my debts which will leave back at square one again
The online business I’m looking at lends itself very well to using credit cards to purchase products etc, however with my credit record now in tatters do you have any suggestions on how I can overcome this. From some online research I’ve done getting some sort of secured credit card is one way of overcoming this whereby I put a reserve of money £4K into certificate of deposit and they then give me a credit card with £4K credit limit. The other big plus so I understand with this is that if I regularly max out the credit card time after after but always pay it back within a couple of days my credit will improve drastically. Is this correct or will this not make a jot of difference and will still have to wait for 6 years for my score to get back to a respectable level?
Sara (Debt Camel) says
“I put a reserve of money £4K into certificate of deposit and they then give me a credit card with £4K credit limit. ” Not sure how this helps you at all?
“if I regularly max out the credit card time but always pay it back within a couple of days my credit will improve drastically. Is this correct” No it sounds titally wrong. Maxing out a credit card never helps your credit score. What does help is repaying balances in full every month. So it is better to buy something small each month eg a tank of petrol and repay that in full then to borrow a lot which you can’t repay in full.
Also if you have problems such as defaults, getting a good record with a different card doesn’t remove the damage. You have to wait until the defaults go after 6 years.
Katie says
Hi I’ve wrote before and you were really helpful can I ask another question or2
To help my husbands credit score he has got a credit builder credit card how long till that starts effect his credit score also got a loqbox account although only for the lowest amount and I’m about to transfer our energy bills into his name
His defaults will come off if jan 2019 apart from 1 left over and he’s had 2 late payments on a settled account in apr and may this year
Is there anything else I need to do except wait and how long roughly will I be waiting
Thank you
Michelle Eldridge says
Hi. Please may I have some advise?
Myself and my husband are looking at getting a mortgage on the house we live in, after the LL decided to sell after 6 yrs of us living here. Problem is, is that my credit score, with Equifax, is poor (300). I have just paid off two credit cards. One is reflected but the other is still to come off (capital one £166). It also shows that I had a payment plan with with British Gas, started August 2014 with £97.80 left to pay and one from the same time for electricity, still BG, that was paid off couple of months ago. Also shows a credit search October 2017.
Apart from these anything else is fine and my husbands report is good.
My question is
Will this stop our 90% mortgage application going through?
And
Will it help at all to pay off the balance of the gas payment plan, bearing in mind we are short on time?
Many thanks
Michelle
Sara (Debt Camel) says
I think you need to check your credit records with Experian and Call Credit too, to see if anything shows there. See https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to do this for free.
The BG and electricity accounts show late payments? The two credit cards, did they have late payments or defaults?
Michelle Eldridge says
Thank you Sara.
No, no late payments for Gas, electricity or the credit cards. Just shows that I had an arrangement to pay off a debt I had for gas and electricity due to moving into a place with a back boiler and not understanding how they work, and one missed payment while trying to come to an arrangement in 2014.
Thanks again
Michelle Eldridge says
Ps Credit club (Experian) scores me good :)
LJ says
My husband and I are trying to move house currently and we have done all the sums etc. and worked out the payments we can afford and have gone to a FA as the house we really want we would be using Help to buy they have said that our amount is above the 4.5 times they will lend due to a car finance we have. We are extremely lucky that our parents have offered to help us to pay off the finance on our behalf so that we no longer have this liability and then reach the 4.5. However I just want to ask will this affect our credit score, will paying off the loan car early look bad, will it go against us, will they ask questions as to how this was paid? We will over time have to pay our parents back however this is our dream house. At the same time I don’t want to borrow all this money from our parents pay off the car and then be in the situation that mortgage lenders still won’t lend the money.
Thanks
Sara (Debt Camel) says
Paying a loan early should not harm your credit score. You need to ask your mortgage broker if the lender will ask about how the car finance was paid off and how certain it is that this will make the difference to the size mortgage you are offered. If things are very tight, also ask the broker what will happen if the lender values the house at less than the price you have agreed – will that also reduce the amount they will lend? This can often happen with 5% deposits.
Ian Swift says
Hi, I have a bad credit history from my past and want to pay off the debts that are showing on my credit history. They have offered me discounts on these. My question is – is it better to pay the full amount or the discounted amount. How would this effect my credit rating if I pay the discounted amount ?
Kind regards
Ian
Sara (Debt Camel) says
Are these debts marked as defaulted on your credit records, if so what are the default dates? Also are any of the accounts very old? (This may sound irrelevant but it isn’t!)
Ian Swift says
Hi, sorry for late reply.
They are marked as a default.
One is a utility bill dated back to Dec 2015 for £133 and the account start date says 24/02/2015
The other is a mail order marked as default and dated back to Nov 2015 for £351 it does say on there account holder status “gone away” whatever that means ? And the account start date was 12/10/2013
Kind regards
Ian
Sara (Debt Camel) says
Sorry I missed your late reply!
Reduced settlements don’t affect the headline credit score you get, and the debts will still drop off 6 years aafter the default, but they are visible on your credit record so they may make a few lenders less keen to lend to you. If you have money problems it’s usuall better to take the offered discount – but if you have just inherited a lot of money you may think it’s worth repaying in full.
The “gone away” notice you should dispute – it’s meant for when you moved and didn’t tell the lender who can’t contact you.
Paul Mathew says
Hi,
First let me thank you for setting up this website and amazing help you provide to people like us.
I recently denied borrow more on my mortgage based on my credit score being low.
I do have I do have significant amount of debt as loan, credit card and Hire purchase. I’ve been paying dues correctly without any break.
Im in a position to pay off all the debts. I’m wondering if I pay off the debts and reapply to borrow more would it make difference?
Thanks
Sara (Debt Camel) says
Can I ask why if you are in a position to repay your significant debts you want to borrow more on your mortgage? how much equity do you have in the house? How large a mortgage do you want? What is your income?
Sharleene Finn says
Iv ask several loans out in past 2 years and applied for credit cards and got a mobile and untilitys ( divorce breakdown nothing before 2016) I opened account to get a good credit rating
All account all paid in full use odd credit now and again but always paid
I’m applying for a mortgage as part of my divorce settlement to keep the house 48000
I work part time but with tax credits and other bits incomes roughly 33000 a year
Credit rating is 815 on Experian with one credit search due to me silly thinking being a guarantor wouldn’t affect my credit file but had a hard search
But call credit have a default but says settled from 5 years ago will drop off in 11 months but was at a old address and I knew nothing about it as iv only just discovered call credit been using Experian and equifax
What’s likely hood I will get the mortgage cos I’m petrified I’m going to be homeless it’s taken me 2 years to finally get financially stable and had ill advise about loans
Sara (Debt Camel) says
If the only default on your record was settled 5 years ago, then there will be lenders who don’t care about it. Go through a broker, not direct to a lender.
Natalie says
Hi,
I have two questions
1) I was divorced two years ago but we are only just selling out jointly owned home. My ex has over 40k on credit cards and says it is making his credit score low. Will this be having an affect my credit score? As soon as the house is sold and I have no further financial connections with him will he be disregarded in terms of my credit?
2) My current partner has an IVA that ends in 5 years. If I buy a new house in my name and mortgage it in my name, would him living with me, paying me rent and being registered to my address affect my credit rating? After the IVA term would I be able to add him on to a mortgage with no problems if I have been paying it alone up to that point anyway?
Thanks
Sara (Debt Camel) says
Once your house is sold, if your ex still shows up as financially associated with you, you should ask all three CRAs for financial disassociation, see https://debtcamel.co.uk/splitting-up-finances/.
Someone living at your house with bad credit problems will not affect your credit rating. If you can afford the mortgage on your own income that should be fine. You should wait until his IVA has finished and all traces have gone from his credit record before trying to add him to the mortgage (see https://debtcamel.co.uk/repair-credit-record-iva/). Some lenders are fussier than others – try your existing lender first, if they say No and you want to remortgage elsewhere, go through a broker not direct to a lender.
Jemma says
I have a car on PCP never missed a payment and am coming to the end of a 4 year agreement next year. I want to swap for a new car and carry on pcp for another 4 years rather than keep the one I’ve got. Will my credit score affect this as it’s now poor however I’ve never missed a payment on my car? Thanks
Charles Flynn says
Hi,
I had 7 defaults on my file, I have just paid all my debts in full, I currently have a low credit score.
Will paying off all my debts improve my credit score over time ? or is there anything else i can do to improve my situation, currently i am debt free for the first time in 15 years, all debts on my credit report have now been paid in full.
Sara (Debt Camel) says
Paying off the debts doesn’t improve your headline credit score – mad, isn’t it…
BUT having cleared them all, you are now more likely to be offered credit by other lenders. And as time goes on and the debts were all settled more than a year ago, this increases.
What are the default dates? It may help to focus on when each one is going to drop off.
Are you in a position to be able to save every month? If you are, using LOQBOX (see https://debtcamel.co.uk/loqbox/) can help the process of rebuilding your credit score. But until almost all of the defaults have gone, it isn’t going to get much better.
Tamara says
Hi I am just wondering what my chances are of a joint mortgage. My partners credit is pretty good while mines isn’t. I have 4 defaults. One September 2018 and the others August 2018. I have paid them all in full just recently. The total amount of all defaults is low at £899.04. Will it help that the default amounts are low? I basically just buried my head in the sand and ignored everything. Hindsight is a wonderful thing. Is there any point in applying now with a good broker or should I wait and if so how long?thanks in advance
Sara (Debt Camel) says
Oh dear. Yes the very low default values are in your favour but you may still struggle. Talk to a good mortgage broker and see when they suggest you should apply. And remove your head permanently from the sand – no mor problems from now on!
diana says
Hello
My credit score is poor, by Experian 690 points. My credit utilisation is 27%, all bills payed on time and not late payments for the last two years. I still have my credit card to pay off £1000 and my washing mashine which is £440 and its showing on my credit score.
Additionally, I have a default from 12.2013 and I was paying this monthly. Now, they agreed on my settlement offer and in March I’ve sent my last payment. No more payments into this account. It will drop off in December 2019(well I hope so).
To start with I was £3500 in debit and I started to clear up my finances in summer 2018, I did well I think.
My question is: how long more till my credit score improve? I am actually 30 points away from fair score but I am finding nearly impossible to improve now, regardless paying lump sums into my debit.
My and my fiance want to buy house now. Bank said, 15% deposit as my credit score is low. How can I improve fast? All I need is 30 points to be in the fair mark.
Thank you,
Diana
Sara (Debt Camel) says
Your credit score will improve a lot in December when the defaulted debt goes.
Before then, paying off your credit card completely and afterward using it for something small each month such as a tank of petrol and repaying it in full every month should gain you an extra 60 points. See https://debtcamel.co.uk/credit-score-change/.
But read https://debtcamel.co.uk/morgage-planning-poor-credit-debts/. It is possible that getting your headline credit score up won’t be good enough because you have only just settled this defaulted debt. So you could increase your credit score and you may still be turned down. You may not. I’m just saying this is possible.
diana says
Hello,
Thank you for your fast reply Sara. I will pay it off all of my debit and then we will see, in the worst case scenario we will wait till January to get mortgage.
Then we should have more deposit so hopefully we will be able to obtain better rates.
Diana
Richard Harrison says
Hi,
I have recently found out that my credit card had monthly charges on it after clearing the balance in Nov 18 of just over £2700. As of the 26th April 19 the company write off the debt of £24 after I called them but they are not going to update the credit history which shows I am 4 payments late. The last time they updated the file was on the 28th April 19 but has not shown as the account as settled.
Due to this I was refused a remortgage.
I have other accounts on my file and all at 0/0 for the past 24 months. With no other late payments and no defaults.
Is there anything I can do to get the late payments changed as they did not make me pay £24 and just wrote it off? Also I have a mortgage with this same company which I have not missed a payment.
Or do I need to wait for the late payment to age before reapplying for a mortgage?
Thanks
Sara (Debt Camel) says
If the company has written off the charges, that suggests that there was something wrong with them – either they should never have been charged, or the lender failed to collect a direct debit, or they failed to send you notifications of the charges, whatever…
You should put in a formal written complaint to the credit card company, asking for the negative marks to be removed and the account to show as settled. Say you will be taking this to the Financial Ombudsman if they do not agree. If you have previously had a good payment record on the credit card, point that out as well as your mortgage with them.
Paulina says
Hello, I hope you can help me, I can’t find the answer to my question anywhere :(.
I have two default accounts (credit cards, the interest was too high, I could not pay sadly so my accounts went to default, one on Feb 17 and other March 18).
I have the arrangement with both companies and I’m paying by direct debit each month so the payments are always on time.
However, my credit reports show that my payments to those companies are “missing/late payments”. I don’t understand why is that?
I understand why my accounts went to default but missing payments when they are all on time?
Is there any way I can “fix it”? I work on improving my score very hard but this is stressing me out a lot :(.
Can you help with some advice, please? Thank you.
Sara (Debt Camel) says
Can I ask if they have frozen the interest on these accounts? how much are you paying each month and what is the remaining balance?
Charles C says
Thank you for this platform. I have had an issue with 02, I have been having an ongoing dispute with 02 for 3/4 months regarding final balance to be paid. I would like to mention that prior to this unfortunate circumstance where I was misinformed by their advisors during the course of the year, I have been an extremely loyal customer and could not have recommended O2 enough.
Unfortunately, I then had the dispute with O2 and based on the information I was provided by an advisor I acted on that, it has now come to light that this information was not correct as presented by the advisor. I then made the decision to wait and to raise this complaint with the Ombudsman service who have stated that due to there being an open complaint this does not stop payments being made. I was never refusing to pay the outstanding balance but I just wanted clarity as to how much was actually to be paid.
The Ombudsman have proposed a figure of £80 to be added to my account and for me to pay the rest, but they will not require them to remove the late payment markers. I have written to 02 (several teams), complained and more but they keep insisting that they will not remove the payment markers. Even though I have not accepted the Ombusdman offer because I want the markers removed more than anything. What else can I try?
Sara (Debt Camel) says
Is this the Financial Ombudsman? How large was the balance owing that you have had £80 credited to? do you think that was the right decision?
Charles C says
Hi, the debt was £569 (this was because the advisor told me I could cancel the contract without termination charges) 02 then decided to go against this. I proved to the Ombusdman that this wasn’t the first time 02 had told me something then changed it. Further to this 02 sent me a final bill 2/9 then sent me messages and emails on 3/9 that it was overdue.
The decision from the Ombusdman I feel was wrong and I didn’t accept their offer, I just wanted the late payment removed. I am not sure what my next options are now, I am happy to pay the amount I don’t even care but just want the information placed removed
Sara (Debt Camel) says
The Financial Ombudsman? (There are others…) If yes, was it a decision by an adjudicator or by an Ombudsman?
Charles C says
It was The Ombudsman Service Limited, it was by an Ombusdman.
Sara (Debt Camel) says
ah ok, not FOS. I don’t know a lot about that Ombudsman, but I think you have a right of appeal? Have you asked them about this? You may also be able to go to court, but you should take professional advice before deciding to do that. Your local Citizens Advice is a good place to ask for help.
Charles C says
I have appealed and still they are adamant that 02 should have put the late payments on the file. I am now just looking to get the markers removed. My next step is legal advice.
Ryan says
Hi Sara,
Great website and great post. I’m in approx £25k credit card debt, unfortunately gained when I was made redundant in and then went back to uni to retrain in a new career. I’m finally at the stage where I’m earning a wage again and wondered if the best strategy to improve credit rating was to basically use all my wage to pay of as much of credit card each month, but then only spend the essentials back on my card so overall my card debt would be going down.
I’ve never missed a payment but get rejected for further cards with 0% balance transfers. Overall my available limit totals £45k, so my debt utilisation is just over 50%.
I just desperately need a way of increasing my credit score as currently I’m only paying interest on £10k of my total debt and would love to have this interest free before a further £10k of the debt becomes eligible for interest in Q4 this year.
Would you have any advice
Sara (Debt Camel) says
Stop using the cards totally. Using & paying off just makes it harder to see what is happening, it doesn’t help your score. Cut em up!
You may be looking at a big problem as it’s becoming harder to get good balance transfers – see https://debtcamel.co.uk/zero-per-cent-balance-transfers/.
What are your minimum monthly payments at the moment? How much extra do you think you can afford to overpay by every month?
Charles C says
Hi Sara,
Thanks for the 02 advice, I have taken it up with CAB and just wrote to 02. Waiting to hear back from them. I wanted to ask – with a small limit £200 is it worth having a credit card to help build my score or does it not do anything?
B says
Sara,
I have a very poor credit history. With 8 defaulted accounts. Loans. A credit card. I have just about paid all my debts off now. But my credit score is ‘very poor’ i cant even get car finance. It is an awful situation for me, as i have a good job, good wage, and want to look at getting a mortgage in the next 12 month. I dont want to go into renting as it will just be dead money, especially when i will have quite a good deposit behind me. Do you have any advice for me to improve my score, and towards a mortgage any advice. So many stupid mistakes have harmed my credit, ive never had any DMPs or bankruptcies im only 25 years old. I recently paid off the debt when i got my head above water so do you think it will improce the score in a couple of months? Thank you.
Sara (Debt Camel) says
how long ago were your defaults?
have you cleared all your debts or are there some you are still paying?
Toy says
Is it better to pay off interest free payments on a catalogue bill or pay it off in full in order to build a credit rating? I am asking for my 19 year old son.
Sara (Debt Camel) says
So he has an item bought on say 12 months interest free credit with say 10 months left to run but could pay it all off now?
The best thing for his credit rating is to divide the balance in 10 and set up a standing order to pay 1/10th each month. This gets him 10 nice ticks on his credit record and means he will pay no interest.
But the best laid plans go oft astray…
It is essential that the whole amount is repaid in full by the end. It’s not like a 0% credit card deal where at the end you just get charged interest from that point. For the majority of BNPL deals* Otherwise for the balance that is left he will get walloped with a whole year of interest being added… and the interest rates on these deals are often high. These deals are traps for the unwary.
I would suggest a compromise of dividing the amount into 6 and repaying over the next 6 months. That still looks good on his credit record but gives him some wiggle room in case of difficulty.
* he will have to read the small print to see if this applies to his. But this is what normally applies and if he doesn’t want to read the small print he should assume it applies to his purchase.
Dan says
I am looking to buy my first home and need some advice.
I have two defaults (£29 & £31 from mobile phone providers, defaults dating Feb 19 & August 18, both satisfied in 2020). No CCJ, IVA, Backruptcy etc.
My credit scores are low 292 on equifax, 599 on check my file, 501 on experian.
until last month I had two loans with total balance of £18,000 outstanding and two credit cards with combined balance £13,400 (both cards maxxed so 97-100% utilization)
I have paid off both loans in full (just waiting for my credit file to reflect this) and paid both credit cards off but not closed the accounts.
average age of my accounts is 7 years old.
Not applied for any new credit recently
Ive had lots of loans in past (not pay day) and never missed or late payments (over 375 on time payments on credit agreements)
I am on electoral role
I have a 41% deposit for the house.
Given the above do you think ill be able to get a mortgage when my loans/cards show theyve been paid?
Would I be able to go to high street or would it be a bad credit mortgage required?
do you think there is anything I can do to improve my chances of being accepted?
Sara (Debt Camel) says
It looks as though you have been heavily reliant on credit for a very long while. Now presumably you have inherited some money or something?
So you have three problems:
1) the defaults. They are very small and not related to credit, it is possible some lenders may be prepared to disregard them
2) the affordability of the mortgage. The fact you have a large deposit is good, but it doesn’t affect the need for affordability checks
3) the risk-averse nature of the mortgage market at the moment.
I suggest you talk to normal mortgage broker, say London & Country or Habito. See what they say.
Getting a bad credit mortgage is always risky and this is especially difficult now because the pandemic may lead to house price falls and a difficult mortgage market for years. You cannot believe a bad credit broker when they say you will be able to remortgage at a better rate in a couple of years – that may not be possible. Too many people in 2008/9 saw their bad credit mortgage lenders INCREASING their mortgage rates when everyone else was seeing mortgage rates being cut.
Of course this may turn out not be a problem and the housing and mortgage markets may be back to normal in a year. But I would not bet your financial future on that happening.
If one of the brokers I suggested says they can get you a mortgage at an OK rate, great. If they don’t, then the best thing is to wait a year and look again. You will have saved up some more money – not that your deposit is too low obviously, but the fact you can save regularity will emphasise the fact you no longer need credit. And house prices may have fallen. And your defaults will be further in the past.
Dan says
That’s Brilliant
Thank you for your help.
I’ll give them a go
Mattie says
Good evening,
I have a few defaults on my credit file due to be removed late this year as 6 years would of passed. There is still an outstanding balance on these debts from years ago which I have never paid. I know the best thing to do is pay these debts but how would it actually affect my credit when the default disappears but I still have the outstanding balance ?
Many thanks,
Mattie
Sara (Debt Camel) says
Hi Mattie, I suggest you read https://debtcamel.co.uk/no-calls-or-letters-about-debt/
L says
Hi Sara
I’m looking now to pay the remainder of my debts off, remaining balance is £5644 on all scattered between credit card, payday loans, bank loan, bank accounts and phone bills. I want to do this over 2-3 months which is affordable for me now. I want to get a mortgage in the future, but I’m worried I won’t be able to because of my horrendous credit history. I’ve defaulted on all of them for years, some haven’t chased, some send an occasional letter. I have two CCJS, however one i have sent off for a certificate of satisfaction (settlement). The other CCJ I plan to pay first with some others. Will my credit score get a big boost when I pay all of these off? Will I be eligible to get a mortgage in less than a year, or even a year if I’m debt free?
Sara (Debt Camel) says
As the article above explains, paying off debt doesn’t improve your credit score.
The CCJs drop off your record when they are 6 years old – when will that be?
Sara (Debt Camel) says
was your odd Amigo problem resolved, so they didn’t refund your guarantor on the 1st loan?
Shane O'Shea says
Had 1 credit card, messed it up as was going through a dark period of my life. Brother stole my card, got me in debt and I refused to pay it (he was under 16, I should have known better). It’s not a dreadful amount, however it’s the time that I left it that’s probably going to effect me. Paying it off now, just wondering where I can go once it’s paid off so that I can increase my credit for the future. I am very ignorant on this topic and would like to know more to prepare me for the future. Should have plenty of time to turn it around as only 25
Sara (Debt Camel) says
That sounds a realistic attitude to a sad story.
Can you say how large the debt was at it’s biggest? How much are you paying a month?
Is the debt marked as defaulted on your credit record? If yes, what is the default date?
Kitis says
I was out of UK for 3 years, and moved to a different address after coming back. Checking my credit file i had about 5 defaults, 2 CJJ arising from two of them. I have paid the CJJ’s, 4 out of 5 defaults are settled. Fifth one is only showing in equifax, disputed but the dispute failed. Called the debt agency Lowell giving my all details , also the old address- but they cant find anything related to the default on my name. The default date is 2016- do i wait for it to drop off in 2022? So very confused.Most of my defaults are from 2015-2016, one in 2017
My score is very low, cant take out any credit card as they all reject me, even the ones i am willing to pay a fee for. i want to be able to apply for mortgage in 2 years time. My debt were not huge- all together about £2000 but since they were for multiple things like phone and small credit cards my report looks awful. Feel like I am trapped on this credit thing.
Can you please suggest me things i can do to improve my condition. I dont want to be renting forever. I have enough saved for property but cant due to my credit score.
Would my bank be willing to give me a credit card if i explain my situation? i am stuck, confused, deflated
Sara (Debt Camel) says
what dates were the CCJs?
Samy Bencherif says
Hi Sara,
I recently payed off most my debt – had a student overdraft that’s been payed off and a product I purchased using my Argos card nearly paid off as well.
My credit rating has taken a hit but steadily improving. It sits on the middle ‘Fair’ range, not too far from ‘Good’.
Now I recently applied for a credit card within my main bank that initially got the overdraft from.. and I got declined. I’m baffled because I have no debts left to pay nor do I have late payments recorded on my credit report. Not to mention that I’ve had this same account for 9 years. On top of that, I’m not sure how to improve my credit rating in the future given I can’t take out credit especially if I want to get a mortgage in the near distant future.
What could you see me doing to improve my situation?
Thanks
Samy
Sara (Debt Camel) says
A lot of banks are giving very little new credit card debt to anyone unless they have a very good credit rating at the moment.
Have a look at getting a LOQBOX – that means regular saving for a year – good if you want to save a deposit for a mortgage! – and it is structured so that it looks like loan repayments. See https://www.loqbox.com/en_gb/
Sadie says
Hi. We have a 9000 on a debt management plan. Due to end in 3 years it was nearly 17000 (due to my husband having a gambling addiction which he has now gained full control over) at the time I panicked and just went for the best option possible but I am desperate to remortgage and we can’t. I can now get a personal loan with a 3.3% interest rate which i could afford is it best to get the loan to pay the debt off and that will fall off the report quicker.. or am I best leaving it this way keep doing what where doing?? I’m stuck.
Sara (Debt Camel) says
How long has the DMP been running? How many debts are in it and how many have been marked as defaulted with a default date added? What are these default dates?
Billy says
Hi
I have £8000 in credit cards (3 cards) which I am paying off slowly but the interest rate is killing me. If I was to call and agree a settlement fee would this improve or effect my credit rating ? Am I better paying them off slowly ?
Sara (Debt Camel) says
Sorry several questions!
Have you defaulted or missed any payments on these cards?
Are you paying over the minimums?
Do you have a Barclaycard?
When you say “settlement fee” do you mean pay the debts off in full or are you hoping to settle for less?
Daniel says
Hello I have a default from my Halifax current account about an outstanding overdraft balance at -£218 I also have a old phone contract in arrears of £1321 I can only afford to pay £20 a month for both debts. Is it better to pay £10 to each or is it better to pay my overdraft off first then worry about my old phone contract after I’ve cleared the £218 overdraft?
Another thing I also pay my overdraft through a debt agency ( wescot) but on my credit file it doesn’t display as wescot it displays as Halifax and every month is saying that my overdraft is still being used even though it’s in a default is this right?
Weatherman says
Hi Daniel
To be honest, the best thing to do in your situation is get some debt advice! There’s no single answer for ‘what’s best’ – but there are things you should be aware of. For example, if you pay off a greater % of one debt than another, you might not be able to get a Debt Relief Order (which would write off your debts altogether).
National Debtline can give you free advice: 0808 808 4000
Wescot will have been contracted by Halifax to collect the debt – Halifax still own it, so yes it should show as them. What type of notification are you getting every month? Is it a new default being added, or missed payments, or something else?
Daniel Brosnan says
Hello thanks for your reply it’s a use of overdraft used every month notification even though I’m paying it off does this not freeze the account to stop it stating that I am i using my overdraft?
Weatherman says
Hi Daniel
No problem.
I’m not sure about that I’m afraid – I would ask Halifax about it and see what they say.
Mark says
Hi , I got divorced and a joint loan defaulted in April 2017 , I realise after 6 years it drop off but I’m looking to move and wondered is it worth paying off ? (I’d have to borrow from family to do it ) or won’t it make any difference to a mortgage decision ? Also been offered 50% off just don’t know what’s best for me to move on as quickly as possible without this effecting me ! Thanks in advance
Sara (Debt Camel) says
The chance of you getting a new mortgage an ok rate with a non settled default on your credit record are about zero.
It has to be settled and fast – many mortgage lenders want debts to have been settled for a period (often a year) before they will lend.
50% off will save you a lot of money. A few mortgage lenders may prefer debts to have been repaid in full but others don’t care. Go through a mortgage broker who should direct you to a lender who doesn’t mind partial settlements, don’t apply direct and cross your fingers.
Lauren says
Hi there, I have £6000 debt spread over multiple credit cards. If I pay them off over 12 months, will my score be good enough by the year 2024 (2 years after debt is paid) for a mortgage or will I still have a bad score?
Weatherman says
Hi Lauren
There’s no simple answer I’m afraid! Every lender interprets the information on your credit report (*not* the score itself, which is just there as a guide for you) itself. And even with bad marks on your credit report, it can be possible to get a mortgage through a specialist broker, although you might. and will very likely pay a higher interest rate.
What makes you think you have a bad score at the moment?
Sara (Debt Camel) says
If you are using a high percentage of your credit limit, this harms your credit score even if you have made all the payments on time. Here if you pay down the balances, and even better clear them, your credit score will improve very quickly. See https://debtcamel.co.uk/credit-score-change/
But if you have a poor score because of defaults or missed payments, your score itself will not change you pay off the balance. But this will still make lenders, including mortgage lenders, more prepared to lend to you. So if you can clear thos balance in 2021/early 2022, then your chance of getting a mortgage in 2024 is much better. See https://debtcamel.co.uk/improve-credit-score-mortgage/ for details.
Ben says
hi.
so i’m in about £2k worth of debt with different companies according to my credit score. is my score likely to increase as I pay it all off? if not, is there a way that i can improve my score?
Thanks
ben
Sara (Debt Camel) says
What sort of debts are these – loans? Credit cards? Or what?
And do you have any missed payments, payment arrangementss or defaults showing on your credit record?
Ben says
Basically all of them I have defaulted on, but I’m settling the debts within a year.
Basically mobile phone bills all of them are.
Thanks
Sara (Debt Camel) says
As the article above says, paying off debts will not increase your credit score. But it will mean that other creditors may be more prepared to lend to you – and it removes any chance of you being taken to court for a CCJ.
As the debts have defaulted, it’s possible that the creditors may agree to settle for a smaller amount, see https://debtcamel.co.uk/debt-options/less-common/full-final/
Ben says
Alright thank you Sara.
Anna S says
I am in a terrible financial mess. I have poor credit due to defaults, I’m on a DMP and have a second charge mortgage. Along with my mortgage I owe ££152,000. My mortgage is £94,000. My house is worth £175,000 plus. I feel I will never get out this mess. I earn good money but a lot is going on paying debt at the mo. If I sell my house and pay off everything I could be left with possible £20,000 for a new house but would I get a concrete no from every lender due to my history? Would my credit file be forever shot to pieces? I feel the only options would be to continue to struggle or sell , clear debt then rent 😖 but with two young children it probably will be a nightmare. I’m also 47 so time isn’t on my side mortgage wise so I would be looking at a 10 year one.
Sara (Debt Camel) says
who is your DMP with? how long ago did it start? how large are the debts in your DMP?
how large is the second charge mortgage?
when does your current mortgage fix end?
Franco says
Dear Sara,
Hope this message finds you well. I have had about £ 3500 of debts for about 4 years because of unforeseen circumstances, but I pretty much paid them all a few months ago. My credit report shows as ‘very poor’. Lots of ‘defaults’. My understanding is that even if I paid most or all the debt, it will take 6 years to look ‘better’? Also, I do not at all care about borrowing money. In fact, I’ll never want to use any credit cards ever again. As for loans, I do not want to borrow any money, ever again. I apply a simple rule: do you have the money to buy what you want? No? Then forget it exists, and don’t care.
Am I correct in thinking that in my case my credit rating is irrelevant? Thank you.
Sara (Debt Camel) says
If you don’t want to borrow money again, then your credit score is a not very interesting number.
Stefan says
Sara, could you please help me understand this:
I want to pay off early a personal loan that I took last summer. I only took it for 12 months but I want to pay it off now, 3 months before.
Is this gonna improve my credit rating or the opposite?
Thank you so much!!!
Sara (Debt Camel) says
In the short term closing any credit agreement hurts your credit score a bit, but this effect is mainly temporary if you still have other accounts open.
And lenders don’t use the credit score number you see – some lenders would be more happy to lend to you when this loan has been settled.
I wouldn’t worry much about this