Repaying old loans - which repayment strategy will give maximum CCR/FICO rating benefit?

[GesilaTi]

Hello all,

First post - I believe this is in the right arena but open to correction.

FYI the below deals with relatively small amounts of old debt, and I am lucky enough to be in a position where the money is not a problem for me, so the greatest respect to everyone who is losing sleep at night over massive debts and financial struggle, who might perceive the below as being glib/superficial.

Long story short - when I was younger and much dumber I took on two small (in context) debts - a credit union loan worth 2,000 euro and an MBNA credit card with a limit of 3000 (which naturally was maxed out after a while - on what I cannot tell you and I likely would not want to remember.)

So approx 5k worth of debt. I was unemployed when MBNA gave me my credit card and I had a part time job a year later (approx 180 euro per week supplemented by the Back To Work scheme) when I got my Credit Union Loan.

Neither was ever paid back. Both because I hadn't a penny and because I was semi-retarded. This was roughly 2013/2014.

Fast forward to today and I have built a very good career for myself. I have a mortgage which has never missed a payment, and two credit cards which clear their balance to zero every month by DD, and have gotten and cleared personal loans since without a missed payment.

Pulled my CCR report recently and the two loans are still being reported as Active with an ever increasing tally of missed payments.

Perfectly fine, but out of line with my by now much-improved fiscal responsibility.

The MBNA card is with Cabot Financial and the Credit Union loan seems to still be with the Credit Union.

Being financially much better off now I would like to clear these two old loans in full and make all right with the universe. I am opening an account specifically to drop the 5k in so that I can silo off this whole debt repayment thing.

I just want to know the best strategy to do the above.

Do I clear each these loans with one single payment to each institution and let that be that?

Or do I set out a repayment plan via direct debit from my new silo'd account and just leave it on auto-pilot and never think about it again until closure of the loans?

If you're wondering why I would pick one over the other, I am trying to decide which is best in terms of repairing/optimising my credit rating with the CCR.

Which strategy would have the best impact?

I am leaning towards putting an agreed amount on autopilot DD for a period of exactly 24 months for each loan. So for the 3000 loan repayments of 125 euro pm for 24 months.

My reasoning is:

1) Creditors seem to value consistent repayment over the instant clearing of an otherwise ignored loan
2) The CCR website states that creditors who pull my file will see the last two years of payment information before closure. So with strategy #2 (payment plan for up for 24 months) the only thing third party requestors will see is two years of payments until closure.

I am uncertain of:

• Both points above
• If this will be listed as re-organised credit and if this matters
• If just clearing them asap is not the better strategy
• What extra information is communicated in the credit report given to creditors/third-party requestors and how either strategy affects this
• If either strategy will really have any impact at all on my CCR

The other concern is with Cabot Financial in general - they operate in a vague grey legal area and only seem to follow the law when it suits their best interests. Fine, but if I pay the full debt in one go and they have an 'accounting error' and do not report the closure to the CCR what recourse do I have? Whereas with multiple small payments at the very least I can pull my own report and verify that the repayments are being reported accurately by Cabot to the CCR.

Lastly, when dealing with both parties and Cabot specifically, is it best to go through a solicitor or is this unnecessary?

Please feel free to chime in with any thoughts or corrections on any or all of the above - much appreciated.

Any clarifications needed also please let me know.

 

[Clamball]

I would pay off mbna first and credit union second. I can see the strategy of paying off in instalments but would you get a discount if you asked them to make you an offer to clear the debt in full in one payment. I would just be concerned that your €3K debt with the credit card is now €6K with interest and charges but if they were offered €3K they might take it, otherwise you would end up paying €6K back over 24 months.

 

[Thirsty]

As much from curiosity as anything else; at what point does the loan become statute barred?

Once a loan is statute barred, can you have it removed from your record?

 

[Bobby Peru 2020]

I would pay off mbna first and credit union second. I can see the strategy of paying off in instalments but would you get a discount if you asked them to make you an offer to clear the debt in full in one payment. I would just be concerned that your €3K debt with the credit card is now €6K with interest and charges but if they were offered €3K they might take it, otherwise you would end up paying €6K back over 24 months.

I was settling up debts recently to help with a mortgage application and was advised to pay the full amount as it will be marked down as paid in full. If I took the discount (which they were open to) it would've been recorded that the full debt was never paid off.

 

[GesilaTi]

Thanks all,

@Clamball the money is there to clear both simultaneously, I was more concerned about the best repayment method for how it would be perceived credit-wise. Thankfully, for everything that they are, Cabot don't charge fees, interest etc on their purchased loans. (I'm not actually sure they legally can.) So the top figure they want from you is as high as it goes.

@Thirsty in real-world terms I don't think there is any statute-barring for debts. There is legally a period of time where the debt can no longer be pursued in court, which I believe is six years. I believe this counter may be reset if you acknowledge the debt in any way but I'm uncertain and open to correction there. An uncleared debt can't be removed from your credit record solely by the passing of any amount of time afaik.

@Bobby Peru 2020 thanks very much, that's very valuable. Having thought about it since I made me post I was leaning towards paying in full anyway. That might clinch it. (Cabot have offered multiple discounts over the years.) Did they tell you anything else? Did they mention a single clearing lump sum is better than installments? (Probably wasn't relevant to your situation.)

Thanks again lads.

Oh and a quick edit to say I found out the CCR doesn't give any kind of score or rating; they just keep and present your record. The ICB (which I believe is a lad in a shed somewhere) does give you your FICO score. Oddly enough my two old debts are not listed on the ICB somehow.

 

[RichInSpirit]

Hi GesilaTi, from your OP you were able to get a mortgage and 2 credit cards since the historical uncleared debts.
It doesn't look like the historical debts caused you any issues with borrowing since. But I think i see where you are coming from if you have the money now and want to repay the old debts.

 

[GesilaTi]

Thanks @RichInSpirit, yes that's true. OP was long enough already so I didn't explain fully, but while I do want to make everything right as I have the money, the other issue is that both my credit cards are with banks that are now pulling out of the country. (Ulster Bank and KBC.) And those cards were applied for before the CCR came online. My thinking is I could potentially end up having to apply for a new card and the CCR could come record into play. I don't really need credit cards, I don't rely on them and just use them occasionally for the benefit to my credit rating really - but they are handy for things like renting a car or signing up for certain online services that don't accept debit cards, and I would not like to be without at least one.

My mortgage was also acquired just before the founding of the CCR so while I'm not planning on going anywhere, if I wanted to get another mortgage for whatever reason, again it might come into play.

As an aside, anyone know after the above banks pull out fully what happens to the bank's credit card accounts? I would be hoping they would be sold to another provider with the minimum of hassle for myself but don't know if that's realistic.

 

[Thirsty]

There is legally a period of time where the debt can no longer be pursued in court, which I believe is six years.

That's what statute barred means.

I believe this counter may be reset if you acknowledge the debt in any way but I'm uncertain and open to correction there.

Yes this is the case.

An uncleared debt can't be removed from your credit record solely by the passing of any amount of time afaik.

I've never had to do it, but I believe you can seek to have your record updated.