In this article, we look into the concept of ‘Settled’ and ‘Satisfied’ credit accounts, and how they can impact your mortgage application.
These are entries that can be found on your credit report, so it’s helpful to understand how they are perceived by a lender.
What are Settled and Satisfied Credit Accounts?
Your credit report is a comprehensive record of your financial behaviour, including how you’ve managed your credit agreements over the last six years.
Among the many entries on your report, you might come across terms like ‘Settled’ and ‘Satisfied’. While they might seem similar, they have distinct meanings and implications.
Settled Accounts
A ‘Settled’ account refers to a credit account that has been fully paid off and subsequently closed.
This could be a loan you’ve repaid in full or a credit card account you’ve closed with no outstanding balance. If you’ve closed any accounts within the last six years, you should see these marked as ‘Settled’ on your credit report.
Satisfied Accounts
On the other hand, a ‘Satisfied’ account refers to a default or County Court Judgement (CCJ) that has been fully paid off, meaning no further attempts to reclaim money owed are required.
Once a Notice of Default has been served, the borrower is no longer a customer but a debtor, and the account is automatically closed. The account information, such as the remaining balance, won’t be updated until the account is marked with a zero balance and a ‘Satisfied’ marker.
The Impact on Your Credit Score
While the terminology itself doesn’t directly impact your credit score, the circumstances leading to an account being ‘Settled’ or ‘Satisfied’ can significantly influence your creditworthiness.
Settled Accounts and Your Credit Score
A ‘Settled’ account, which indicates that you’ve voluntarily repaid your outstanding balance and closed the account, generally has a positive impact on your credit score. It shows potential lenders that you’re capable of managing your credit responsibly.
Satisfied Accounts and Your Credit Score
A ‘Satisfied’ account, however, tells a different story. Even though you’ve paid off a default or CCJ, the presence of these entries on your credit report can be a red flag for lenders. They indicate that you’ve had trouble making repayments in the past, which could make some lenders hesitant to approve your mortgage application.
Many lenders have a zero tolerance approach to these types of credit issues. Your mortgage broker will be able to suggest other bad credit lenders who take a more pragmatic approach.
It’s important to note that even after a debt has been satisfied, the default or CCJ will remain on your credit file for the remainder of the six-year period.
Partially Satisfied Accounts
In some cases, you might come across a ‘Partially Satisfied’ marker.
This is often placed on defaulted accounts when the lender and borrower have agreed to a payment less than the full outstanding debt. Like ‘Settled’ and ‘Satisfied’, ‘Partially Satisfied’ indicates the closure of the account and no further payments would be expected. However, it’s worth noting that County Court Judgements (CCJs) cannot be partially satisfied on credit reports.
How Different Credit Reference Agencies Use These Markers
Different Credit Reference Agencies may use these markers differently.
For instance, Equifax does not use a ‘Satisfied’ marker for credit accounts. Even for defaulted accounts, it will simply use the ‘Settled’ marker once a defaulted account has been fully paid and closed. TransUnion, however, uses both markers when necessary and in line with the criteria outlined above.
You can see how your own credit agreements – both open and closed – appear by checking your Credit Report.
checkmyfile provides the UK’s most comprehensive Credit Report, with information from four Credit Reference Agencies, not just one. If you haven’t already, you can try checkmyfile free for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.
