Your scenario is that you have defaulted on credit cards or loans in the past. In the UK, they remain on your credit report for six years.
Do you wait for them to fall off, or, if you have the money, will it benefit you to pay them off and have the status changed to settled?
Will this make a difference with future creditors and your ability to get some type of financing in the future?
This is a really tricky question in that every creditor has their own guidelines on how they decide to issue credit.
If the defaulted loans or credit cards are not a huge balance, it surely cannot hurt to pay them off and follow up with the creditor to make sure the status on the accounts are changed to settled and paid in full.
This will not change the initial default status, but at least new creditors will see you eventually made good on the debt.
If the debt is larger, it may not pay to pay it off and have the status changed if it is coming off your credit report anytime in the near future.
For example, if the debt is £10,000 and it is five years old, why pay it off when it will be removed from your credit report in about a year.
You can save that money and just delay applying for your new mortgage or car loan until it is erased from your credit report. Just be sure to follow up with the all the credit agencies to ensure it has been removed after the allotted time.
We are by no means suggesting anyone skip out in their debt, but if it has already been defaulted and the time about to expire, you have more or less paid your dues in regard to your credit being restricted over the past years.
If it is a lower debt and you can now afford to pay it off, why not do so and help get your credit rating boosted.
There may even be the outside chance that you can contact the creditor and have them request to have the defaulted account removed from your account. It is a long shot, but you will not know until you try!