How long does it take to clear bad debt?

[misslideaway]

I am 22 years old, have lived by myself since I was 16 and have suffered 3 redundancies in 3 years and it has left my finances in a real mess. I have defaults on all of my loans/ cards but am slowly clearing the debts and making regular payments. I am unable to obtain any credit currently.

My question is, once I have cleared it, how long will it take for this bad debt to stop following me around?

I want to be able to apply for a mortgage within a few years, once my debts are paid..

Any advise would be greatly appreciated. Thank you.

[Loosehead]

Well if from now you always pay all your agreed payements on time then the defaults etc will eventually fall off your record. I think the main credit ref agencies keep records for 7 years but potential lenders vary on what they consider relevant and how far back they go. You can test the state of your credit by applying for something and seing what happens. You can request your own credit recod from Experian/Equifax and see for yourself what they have on you.

[stevie21]

I'm sure Mr Vic will have more detail but I think a credit search predominantly shows the last 12 months. He's more involved in granting credit than I.

If you apply for credit with someone that you've previously defaulted with then there's no limit to the time that they can retain the previous information and hold a grudge.
As far as I know the Data Protection Act mentions keeping things on record for a minimum of 6 years.

Best of luck.

[Mrs_Pegasus]

People can get confused with what financial records need to be retained for tax and VAT reasons and those pertaining to credit history for an individual.

Are you talking about CCJs or missed payments?  CCJs will sit on your credit history for 6 years if you did not pay within 30 days of it being issued.

Both Experian and Equifax have very informative websites where you can obtain your credit report and/or information on report.

www.experian.co.uk

www.equifax.co.uk

[Oneeyedvic]

All as above.

It goes back 6 years. Stevie is right in that the main information is 12 months - however it has historical data going back over the lifetime of the agreement.

 

Bear in mind though, that after a year or two, once you have cleared your past problmes, although it will still be on your file, you will start being able to get credit.

 

If you keep these up to date, 6 years from now and you should have a very good rating.

 

Once word of advice - i assume you are rneting at the moment - make sure you are on voters role and if you move, make sure you go on at your new address. THis is the main factor why people get rejected for credit.

[scorpio61]

Well you are doing the right thing by addressing them. It will take 6 years for the defaults to be removed from your credit file and this will affect you applying for "unsecured credit". You will still be able to apply for small loans through companies such as Welcome, Blackhorse, HFC and the like (the list is quite long) but these companies charge a high rate of interest. Don't fall into the trap of lending money to pay off your debts if your creditors have already frozen any interest, it will not help your credit score.

As for a mortgae in a few years time, don't worry, normally if your debts are under control (managed) then you can apply for a mortgage as soon as 12 months after your last default was registered. The rate will not be the best and you will have to supply a deposit but at least you'll be on the property ladder. Depending on the state of the property market then this should be OK as your house/flat should be increasing in value at a higher rate than the % on your mortgage rate. Standard terms that we are currently seeing mean you'll be locked in to your mortgage for 2 years which isn't a bad thing, after that your virtually home and dry, you can remortgage onto a better rate not far off high street rates.

Good luck, If you need any more info or help call me on 0800 298 7343 and ask for Pete

[Peahead66]

6 years. If you dont have any assets you could very well consider bankruptcy and all your debts would be wiped out day one. Dont get me wrong it still stays on your record for 6 years but you would be free of your burden.  Dont let anyone put you off that idea before you have looked into it.  Also if you are having debt problems dont deal with any of the fee charging companys there is plenty of help and advice out there that is available free of charge.  May I suggest a great place to start http://www.debtquestions.co.uk/debt_forum/

Best of luck

[frugalmummy]

I've been in a similar situation to you, having had to leave home years ago when I was 14.  Many years later suffered debt problems through ex husband's alcoholism.

Cheapskate.com has been a great help to me - all sorts of advice and tips to get you back on track and begin to feel pride in the fact that you are paying your debts AND saving a little bit for you.  Many real accounts of how others like us have done it.  

Good luck, you'll get there. 

[misslideaway]

Thank you all for your help. Your advice is appreciated, I once asked a similar question on another forum and felt like people were jumping down my throat with critism.

I have registered on the electoral roll and am keeping up payments. And of course the hardest thing, being patient. :-)

[jolomo]

hi, i have a debt with barclays of �1200 which was a student loan, left dormant for 3 months which they demanded back, and as i was unable to pay it instantly, it was sold to moorcroft debt recovery, who have now sold it on to lowell finance. it will clear from my file this august, and therefore my credit will appear to be no longer blacklisted.
does anyone know if the debt recovery company can still take action against you to recover the debt? or is it completely wiped? i have been paying moorcroft monthly for the past few years.

[Zamraj]

Hi, i have lived in UK for 4 years (including Studies & Job) and wanted to be my home but due to unfortunate family mishap led me to go back to Brazil. While leaving UK i had some outstanding on my credit cards and never settled for the last 3 years - Now as i want to settle back to UK what are my options - Is my credit history bad - Will i be able to get credit cards or loans etc - What should i adopt to do to clear my bad history.