To pay or to Default ?

[Imac]

I have one default already(Marbles) dated Aug 2010 on my Equifax and CallCredit credit reference files (doesn't show at all on Experian though). I actually then part-satisfied that debt by paying £6K in 2011 (having read AAD forums that was probably a waste of money).

However, I am now threatened with another default on an old Goldfish/Barclays credit card. It is unenforceable as I have formally requested a copy of the CCA and they have acknowledged in writing they don't have it. I was paying them on an AP until 6 months ago but then I stopped paying. Their DCA (Credit Solutions) has now agreed that I can pay £2500 (out of £4420 outstanding) in F&F Settlement (I did avoid putting anything in writing to them).

My question is should I:

a) Not pay anything and hope they will default me immediately (which they have threatened) and then wait for 6 years ?
b) Pay £2500 in F&F settlement so the default hopefully starts running immediately, and also I will have part-satisfied which may be viewed more favourably by lenders than complete non-payment ?
c) Pay a lump off now and go onto an AP so that I don't get a second default on my record (bearing in mind that the existing default is already about 2.5 years ago) ?

I am erring towards doing c). This way I figure I could perhaps finally pay the whole balance off in a year or so and avoid a default. But what I need to know is HOW BAD A STAIN ON MY RECORD IS AN AP - ie in 3 years time if I've been on an AP for a while then paid it all off, would that look worse to a lender than just defaulting now on the whole thing ?

Hope my question is clear. Thank you for any advice (hopefully Niddy may be able to give me his thoughts....) IMac

[SA Gold]

Re: To pay or to Default ?

Hiya,

I guess that really depends on your circumstances and if you need any further credit.
From my knowledge i believe many lenders will search 3 years (mortgages 6) which i guess you are coming close to - so if you don't mind having another brand new one (they can take several months to register after stopped payments) i guess you could do

Good luck whatever you decide.

[Imac]

Re: To pay or to Default ?

Thank you Missy.

Yes, I would probably want to re-mortgage/increase my mortgage/take a loan, if possible, in a couple of years time. Hence I am concerned to optimise my credit rating.

So again I want to know, if I do an AP for a bit now and then pay the whole thing off in a year (my option c)), would my credit rating look a lot better say in 2-3 years time, than if I just default on it now(option a)/b)) ? Is AP history as bad as default history ?

Thanks, IMac

[SA Gold]

Re: To pay or to Default ?

that's the annoying thing: it doesn't matter if you pay it, or not! I found that when i first found this amazing forum and sooooo glad i did

A default informs potential lenders that you broke an agreement with "Credit Card", "Loan" etc for x amount. Someone may correct me if i am wrong, but i don't think they look at anything else.
Harsh but true.

[swanfan]

Re: To pay or to Default ?

I would take a guess that your chances of getting a remortgage with a default already there are at best slim, so really is your choice. Me personally i'd let it default and use the money to put towards your mortgage, but it's a question of whether you wanna risk them taking further action and starting a new default, 6 years from when they default you before it will clear.

[Imac]

Re: To pay or to Default ?

Thanks Swanfan.

But again, do you - or anyone else - know whether me paying the debt off under an Arrangement to Pay would be considered more favourably by a lender looking at my account in, say, three years time, than if I had taken a default on my account instead ? ie How bad is an Arrangement to Pay compared to a default ?

Sorry for repeating the question, but any further thoughts on this much appreciated.

[Never-In-Doubt]

Re: To pay or to Default ?

No an AP does not help you. It's a derogatory marker suggesting you cannot meet the minimum payment hence a special arrangement is in place. Usually with one of those most your other lenders will, at monthly feed update, reduce limits as they perceive you as a higher risk.

[Never-In-Doubt]

Re: To pay or to Default ?

A default is the worse Derogatory formal marker before a CCJ so its pretty bad but most lenders only search the last 3 years (mortgages - 6yr search) so you'd be fine. An AP will stay for 6yrs after the last payment so 12 years in theory (if it takes 6yrs to pay a debt off).

Plus they could do an AP for 5 years, you miss one payment and they can default you so add 6 more on top = 11yrs. Get defaulted now and you know it's gone in 6yrs. End of.

Remember you pay it for x years and each month an [AP] marker will apply, when you pay it off the last 6 years history will remain for 6 years at which time they drop off. So after a year 5yrs would show (all AP markers) and so on

That's assuming it took 6 years to pay off. If you pay it off in a year then the history will still show that bad AP year for the next 6 as it drops down each year.

So a default will come - stay 6yrs and vanish. Just like that.

You tell us what is best, for you, based on the two differences.

Make sense?

[Never-In-Doubt]

Re: To pay or to Default ?

Just to add; should you pay the AP off then the marker is not as bad anymore as it descends with the account history as its cleared. It's when live AP status markers are added that its classed as bad.

Once settled and the AP history only shows the last 3 years - you should be fine for credit but will still likely struggle for a mortgage.

[Imac]

Re: To pay or to Default ?

Thanks for taking the time with those answers Niddy, much appreciated.

I'm particularly interested in your last answer. I'm as keen as anyone not to pay these b******s anything I don't have to. However, my plan would be to pay off the AP in say one year. Then after another three years my first default (on a different card) would have disappeared, and my AP on this card would be three years past, and so I would have reasonable credit rating in four years time ? (rather than waiting for six years if I do the default instead). Does this sound right ?

[Never-In-Doubt]

Re: To pay or to Default ?

Well the other side is get defaulted now and be in same position.

The new default, in 3 years + will be as meaningless as the 3yrs history of AP markers. In both cases you'd struggle for a mortgage.

So it's 6 of one, half a dozen of the other.

Imagine worse case, you can't settle in a year - then after 11 months they default you.... You've added a year just like that.

[Never-In-Doubt]

Re: To pay or to Default ?

Of course totally personal preference. On occasion you could get defaulted, let the bank sell to a DCA then do a deal with the dca to settle lower (10-20%) with default removal. They usually reject the removal but will mark it settled however you may get to pay just 20% and do all that in the same year.

That's another option to consider.

[Imac]

Re: To pay or to Default ?

Mulling over these options ! Thank you very much again Niddy.

[ken100464]

Re: To pay or to Default ?

Just to add to Nids brilliant explanation.

Before we found here we believed the banks and all the cack they talk.

We thought an AP was good and we had a Halfax CC that didnt default but was marked AP. All our other problems defaulted as they should have. We did everything to not default this card. How stupid were we.

In 3 years time everything falls off except the AP which we settled last summer.

The bank had kept up interest and charges and the like so made alot of money out of us.

So the bank we paid, the bank we didnt default with, the bank that got more in interest and charges, the bank who you would have thought would be the one that would try and treat us right is infact going to be the one that penalises us for the next 5 years.

AP's are bad for Joe Public. If you are snookered and a short period of grace isnt going to get you back onto full repayments then get defaulted.

AP's are good for banks because it keeps the account alive.

Sadly Joe Public are led to believe the sky will cave in if you get defaulted.

We regret now paying Hellifax for 3 years for no point. Would have been much better to have let them default us.

But like already said each persons circumstances are different.

[SA Gold]

Re: To pay or to Default ?

We regret now paying Hellifax for 3 years for no point. Would have been much better to have let them default us.

But like already said each persons circumstances are different.

Feel your pain mate. I was paying for 2 years before finding AAD. At least we are on the road to recovery now thou