30 April 2011

Defaulted Debt - To Pay Or Not To Pay?

Part of my journey to yell0brickrd involves my desire to improve my credit rating so I can negotiate better terms on money I will be borrowing for property and business deals in the future. 

We are all familiar with the idea that a bad credit rating affects your ability to secure credit for large purchases. Even if you are able to find your way around that, there is little room for negotiation on the massive interest rates that they will charge as a result of the risk level that they deem you carry. 

This post however is more of a question post. I have been clearing a backlog of current debt i.e. the last 2-3 months, but now I am looking at debts which I have owed for years which show up on my report as ‘Defaulted Debt’. 

What is the school of thinking here? Certain people say that clearing this debt will improve my credit rating as it shows I have paid. Other people however claim that a satisfied defaulted debt is viewed exactly the same as a plain defaulted debt.
The other unclear area is what follows after you have paid. Some say there is no guarantee that companies will adjust your file accordingly and that you have to negotiate to make sure it happens. Is this true?

So here are the main questions that I am seeking answers to

  1. How does a credit score change, if at all, from a part or full payment of a defaulted debt?
  2. If a debt is due to fall off a file, is it still worth paying?
  3. Is it true that there is no guarantee a cleared default debt will be corrected on my report as ‘satisfied’
If anybody has any answers to any of these questions I would appreciate hearing them below! And as I increase my knowledge I will write another post clarifying these questions.

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