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Debt solutions

9th January 2022 · 2 minute read

Published by The Real Debt Guy

  • Credit rating
  • Partial settlement
  • Credit report

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How does a partial settlement affect my chances to borrow?

Not in the mood to read? We got you covered. Listen to the rest with the YouTube link at the bottom of the page

You may be tempted to settle a debt at a reduced amount (partial settlement); however, it is important to know how it affects your ability to obtain credit. We’re going to be straight with you, we never recommend using credit unless it’s used to make you a profit, like a mortgage can when buying a property. Other than that, no es bueno as they say in Spanish.

Marks on your credit file

Firstly, you need to understand that any negative marks, i.e., defaults, County Court Judgment (CCJ) etc will stay on your credit file for six years. Insolvencies like bankruptcy may stay for longer than six years. No matter whether you settle in full or partially the mark will remain for that period of time.

What effect will a partial settlement have on my ability to obtain credit?

Having some sort of settled status may be helpful if the debt still appears on your credit file. If a Creditor or Lender looks at your credit file with the view to providing you some sort of credit facility, they may look at it as glass half full or glass half empty.

Some lenders may look at the debt being settled, even if it is only a partial settlement, as positive (a glass half full) and choose to provide you credit on that basis. Other lenders may look at the debt being partially settled as glass half empty, as the full amount was never paid back and could affect whether they will provide you with credit or how much.

Don't forget to read The Real Debt Guy's final thoughts below!

The Real Debt Guy's final thoughts.

We never recommend you throw good money after bad, unless it can benefit you. So, if you're looking to partially settle a debt to improve your credit score, making it easier for you to borrow, your first question should be “why do you need to borrow again?”.

If it’s to buy a property we totally get that. If it’s because you want to obtain another credit card to start spending again, we encourage you to change your mindset when it comes to borrowing.

By now you should know that partially settling a debt offers you no guarantees that you will be looked at favourably by a lender.

There is, of course, some people who simply don’t like the thought of the debt existing. Sometimes just knowing something is there can really affect a person mentally, and we get that. Your mental wellbeing is very important to us,

We have articles in our Mindfulness section that can help you see things differently. Head on over to check those out.

Simplifying complicated matters.

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