Agreement to Pay impact

[slp123]

Hi All,

As a bit of background - when I was a student I realised I could open a current account with smile (cooperative bank) with a £500 Interest Free overdraft.
At the time I saw this as magical - and even better that they let me open 3 of these accounts.

In July 2010, smile wrote to me informing me that I had broken the t&cs of the account and that my overdraft facility had been withdrawn and I was required to repay the full overdraft amount £500 (on all 3 accounts).

I couldn't repay the amounts in full immediately, so agreed to pay off £30/month on each account (£90/month in total) until the balances were paid off.
In agreeing to this payment plan, I received multiple letters from smile indicating that a default would be applied to my credit report on each of the accounts.

I have recently looked at my credit report with Equifax, and I notice that these three accounts do not show as ever having a default, but that from July 10 to Dec 11, the status is marked as "AP".

I thought this was a bit of a bonus as for the last couple of years I had assumed I had 3 defaults on my credit report and so would be very unlikely to get any credit at all, I have never seen any advice/warnings about APs, only defaults, ccjs and bankruptcy.

I have now graduated, am working and earning a reasonable salary and would like to start thinking about a mortgage.

My questions are:

1. How much of an impact will "Agreements to pay" (related to 3 accounts for a period of about 18months (July10 - Dec 11)) affect any credit applications, and specifically if I am going to start looking at mortgage applications will I have any chance of being accepted or is the "AP" as bad as a default or ccj??

2. If I need to wait until the APs have dropped off my credit report, will I wait 6 years from the start of the AP (July 10) or is it 6 years from the end of the AP (Dec 11)

3. Are these correctly applied as "APs", my understanding is that an AP is an agreement to pay a lower amount that the total debt. In my case I repaid the full balance on all 3 overdrafts over 18 months, not a reduced amount. (I seem to remember a conversation about interest being frozen on the balances which may be correct, but as the overdrafts were interest free I'm not sure - I would have to dig out all the letters etc for details)


Thanks in advance for all your inputs and advice!!!

[slp123]

Re: Agreement to Pay impact

I have just run an updated credit report on Equifax.

These three smile accounts have been showing as follows:
June 10: 1 payment late
July 10-Dec 11: AP
Jan 12-March 13: Zzz (Inactive)

In April, I received a letter from smile informing me that as per their t&cs, as the accounts have been inactive for a certain period, the accounts will close if I take no action. I thought this was sensible, and as such let the accounts close (by doing nothing).

Now, however, the accounts are showing on my credit report as:
April 13: Settled.
Does this mean that the whole time the accounts were showing as "inactive", the repayment would not have been considered "settled"?? It seems strange that only now the accounts have closed the status would move to settled?

Thanks - and apologies for the additional question!!

[Pixie]

Re: Agreement to Pay impact

I don't have too much knowledge about credit reports but I didn't want to "read and run".

From what I understand, lenders only take real notice of the last 3 years though it might be different for mortgages.

Hopefully, someone else will be along after the Bank Holiday who will be more helpful.

3. Are these correctly applied as "APs", my understanding is that an AP is an agreement to pay a lower amount that the total debt.

An AP is an agreement to pay less than the expected monthly payment, not an agreement to pay less than the total debt, so the AP markers were applied correctly.

[mgfboy]

Re: Agreement to Pay impact

If you looking for a mortgage , I think you may well be stuffed for a few years with most if not all main stream lenders you need to be clean for 6 years .

So if I was you unless you have a big deposit , I would just save up for a few more years and then apply.

[ScabHunter]

Re: Agreement to Pay impact

I think mgfboy is basically right here, and that you will need to think about obtaining a mortgage as a long term project.

The one bank in the UK which is prepared to consider individual circumstances without blindly following automated credit scoring systems is Aldermore Bank PLC, although you will still need to be creditworthy. The fact that you have cleaned up the bad history and moved on will count positively with human underwriters, if not with automated systems.

If you are now earning a good salary, I would look at opening a Notice Savings Account with Aldermore, and using it for regular savings. Building up your deposit in an Aldermore account can only help you when it becomes time to apply for the mortgage.

Eventually, assuming you keep the job and don't have any more debt issues, your credit file will become clean anyway. At that point, you should have no difficulty. With Aldermore, though, you may not have to wait until six years have elapsed and the file becomes completely clear.

SH

[ken100464]

Re: Agreement to Pay impact

Bizarre.
Just another view for you to chew over.

Am just on with this exact same thing with one of our accounts but with Halifax.

Like you had over 6 months AP's (indeed went 12 months AP then took 12 months to get to a staus 5 and then another 12 months of AP's)

Not sure about how or what it does. Others will know better than me.Just know I would rather it gone if I can get shut. I am going to have ago at getting the account retrospectivley defaulted. If I do the thing will fall off 3 years before it will now. And as mortgage changes loom this will be priceless to us.

A long shot I know but using the ICO guidelines for defaults. From that AP's should be no more than 6 months then you have 3 months to get back onto contractual before they may default you. Also as the card was asked for back which is a indication of breakdown according to the ICO. (You seemed to get loads of correspondence indicating they felt you had a problem plus they called your account in) Make up a nicey nicey letter and plead with them (I know sticks in ones throat but sometimes needs must).

For us it will make a difference of 3 years if it works. And as this will be our last bad marked account not to be sniffed at.

And why am having ago. Barclays in their new found champion of the masses seem to be breaking cover on this exact same problem of AP's. They are actually admitting if the account gets settled its an additional penalty to the consumer by prolonging the adverse reporting. No shit there sherlock so if you dont pay we will feck up your CRA forever.

But must stress only seems to be AP's on accounts which have been settled (Which yours does) and with nicey nicey letters. And only seems to be Barclays at present. The default takes the account back to when problems began and 6 years after that event its all gone.
Like I say worth a shot for us.


So going back to the OPs first post it will 6 years from settlement it drops off Equifax. April 2013. A restrospective default could make that 6 years from July 2010. So basically same same situation as us. 3 years better off and a couple of years to try and sort it before it does start to impact on you.
Like I say just another slant on it you may wish to consider.

[Never-In-Doubt]

Re: Agreement to Pay impact

Hi

Not read Kens post above but replying to your original post #1.

Ok an AP is applied as an "Arrangement to Pay" if you and your creditor agree on anything that is different from the terms of that product. So say you had a loan at £100 pm and you could only pay £50 for 6 months whilst seeking work your credit file would simply reflect the arrangement and report 6 [AP] type markers with the CRA's.

That is the correct action to take.

If you never paid anything then after 3-4 months they'll default you meaning your credit file will show a default status highlighted with a red [D] or number 8 etc.

Bank accounts, however are very much different because an overdraft is not a minimum repayment model - it's a repayable (in full) on demand facility meaning the bank only have to give 14-28 days notice to remove it meaning you'd have to pay it back in that timeframe to maintain a healthy "Paid on time" marker with the CRA's.

In your case as you did not repay in full, in accordance with the terms of the overdraft, nor did you default - but because you made an arrangement they correctly indicated this to the CRA's by placing the AP marker there.

That was the correct action to take.

So there is no argument about the entries, so we move on to the impact of having 3 x AP markers for 18 months. I think this will affect you especially applying for a mortgage as mortgage lenders play safer now and are pretty strict. CRA records play an integral part of underwriting so I'd suggest you wait till at least 5 years after the last AP entry. So if you last had an AP in Jan 2011 then don't think about a mortgage until at least Jan 2016 as the chances are you'll be declined. That said regular credit such as cards and loans won't be affected by AP markers that much. Certainly not as they'll be showing settled/satisfied.

Questions? Fire away

[Never-In-Doubt]

Re: Agreement to Pay impact

Ken a default is classed as 5x as bad as an AP.

AP's won't necessarily bar you from credit, some will say no (mbna etc) but others will accept you (Barclays etc) plus your internal rating with your existing bank won't be affected by an AP which is said not to be derogatory / but I'm not 100% convinced at that theory

Regards your case, if it was a credit card and you stopped paying they should default you within 6 months. If you were making payments they can add AP's or keep the previous status (ie [1] meaning "full payment not made")

If you're saying you never paid they cannot add AP's to drag out the adverse reporting affect.

[ken100464]

Re: Agreement to Pay impact

Niddy.

Our accounts a mess. It should have defaulted but Hellifax didnt and we all know why. We never got anywhere near contractual payments again and they kept putting interest back on. Cash Cowed comes to mind. In hindsight and with better knowledge a non payment and default would have been better. But we didnt and whats done is done.

Its been settled now but 3 years after the first AP's were processed. So now the account will sit there till 2018. Date of settlement +6 years.

Everything else clears in 2015. By placing AP's they are penalising by an additional 3 years. Yes they dont have to default as ICO is guidelines only.

But have read a couple of threads where Barclays have started to add a retrospective default. For exactly this very point. Yep 5x worse short term but this is a long game. CRA is screwed with defaults now so one more wont matter. But if this is defaulted back to when it all happened they will all fall off in 2015. And if this account goes then happy days. So short term adding to the messy CRA but in the hope we get 3 years clear when they all fall off. I can understand early on or on its own a default would be madness. But for us 4 years into this and the defaults coming to the last full year getting something retrospectively defaulted would be useful.

For us its worth a letter. Because the end result is 3 years earlier being free of the banks. If a bank has broken ranks and I have time before it really matters then its a no brainer just to ask. Its thinking out of the box. They can only say no.

For the OP it as you quite rightly say may be a waste of time. But defo makes the get defaulted ASAP so so true. Stops them doing this. Then having the mess to sort out later.

[SXGuy]

Re: Agreement to Pay impact

In theory your right, but my mothers two natwest credit cards have gone unpaid for around 18 months now. She still receives statements which shows the account is still active, and the min payment goes up and up, its in its thousands now.

They originally asked for the cards to be cut up and sent back, so to me it appears as though they are no registering a default, and continuing to mark the accounts with AP's (from when she originally asked to reduce her payments)

This is something we could try and get sorted nearer to SB, but my concern is, if they dont default her for another 3 years, and refuse to turn back the default date to where it should be (because Natwest are a joke and have no clue about anything) then she could end up having a 2 defaults lasting longer than any other she currently has.

[Undercover Elsa]

Re: Agreement to Pay impact

I have just run an updated credit report on Equifax.

These three smile accounts have been showing as follows:
June 10: 1 payment late
July 10-Dec 11: AP
Jan 12-March 13: Zzz (Inactive)

In April, I received a letter from smile informing me that as per their t&cs, as the accounts have been inactive for a certain period, the accounts will close if I take no action. I thought this was sensible, and as such let the accounts close (by doing nothing).

Now, however, the accounts are showing on my credit report as:
April 13: Settled.
Does this mean that the whole time the accounts were showing as "inactive", the repayment would not have been considered "settled"?? It seems strange that only now the accounts have closed the status would move to settled?

Thanks - and apologies for the additional question!!

Just keep an eye on your file and on the post, as very often "settled" indicates that the account has been sold. If so it may take a while for the new owner to contact you (with a Notice of Assignment) or for the file to be updated by whoever purchased it.

[ken100464]

Re: Agreement to Pay impact

SX think your correct. Just as debts are different doing what we intend to try would be madness if you are trying to get to SB. This is for us purely an attempt to clean up our file on a settled account and nothing to do with UE.

These AP's are being used more and more and although the ICO advice is guidelines they are getting further and further from these guidelines.

The fact you have been told to cut up your card and aint paying are two of the indicators that the agreement has ended and therefore for CONSISTANCY a default should be entered.

As to timescales it seems to indicate if you dont get back onto contractual after 6 months then a default should really be filed.

Again on AP's its clear they should be 6 months max and then you should be back on contractual. If you dont or cant within 3 months of the AP ending they should default you but not so as to put you in a worse position than if you hadnt attempted to pay. So for me that indicates if they default you they shouldnt do it years down the line. They should take you back to if you hadnt been paying at all. And this bit could be the tricky bit if you havnt been payng due to going down the UE route. How to get them to default you without screwing up what you are attempting would need greater minds than mine.

Although guidelines I can see this being a fertile ground in the future for banks to get themselves in an awful lot of trouble. Especially if their reporting is the only or last account messing up your file.
I believe this will be where Barclays will be coming from if indeed their project dont be bastards is real and not myth.
It makes sense from their point of view. Especially on settled accounts.
But for the OP only he knows his intentions and if short term pain is worth long term gain. If he has no other defaults then doing this would be silly.

[ken100464]

Re: Agreement to Pay impact

Just keep an eye on your file and on the post, as very often "settled" indicates that the account has been sold. If so it may take a while for the new owner to contact you (with a Notice of Assignment) or for the file to be updated by whoever purchased it.

I might be mistaken but I read the original post as the OP has settled and paid off the accounts. He seems to have fully settled accounts which have AP's on where the settlement date is last month. Over a year of no activity will have given him green at the end but the AP's will still be there.

These AP's will be visible on Equifax until Apr 2019 and call credit until Dec 2017. If this adverse data can be seen by the lenders I have no idea but how the two named CRA's show data then the OP will be able to see it to the dates above. The difference is if my reports are the same as OP's that Call Credit remove 6year+ monthly markers whereas Equifax seem to wait for the whole account to reach the 6year+ mark before removing the lot. Again if lenders can see this data I have no idea but its defo there on Equifax.
What I was trying to show was a retrospective default could get rid of the accounts in July 2016. But as we dont know the OP's overall situation this could be a risky thing to do.