A very long time ago now, the husband and I were in a spot of financial bother. Neither of us earned very much, debts were lived with rather than paid off… and then one of us lost our job… and things began to spiral.
Having debt and money worries is a sickeningly heavy weight that darkens every waking thought.
It’s an eternal thumbscrew, a metal lid on your brain that sits too tight and squeezes every thought.
There’s much talk currently about ‘the current financial climate’…
Which is a bit rubbish.
There have always been people with debt and money worries. Maybe it’s a little more universal currently – or maybe people are just more open about it. I genuinely think it has become a little more socially acceptable to say “d’you know what? I just can’t afford it”.
I know when it happened to us we felt… embarrassed.
In fact, for a while we simply tried ignoring the threatening clouds of doom.
Please note – that really doesn’t help.
Eventually, we really had to get a grip.
And not in a manage-your-outgoings kind of way – oh no, we were way past that.
We were down the lane and round the corner at the ringing-the-debt-collection-department-and-asking-politely-for-terms-and-please-could-you-not-send-the-bailiffs-round point.
And it was HARD to know what to do.
How to make it better.
The bank didn’t want to provide free advice on covering other people’s debts, and the CAB simply advised us to either move back home with a parent, or bankrupt ourselves.
But we were young, bright and independent – we wanted none of either of those options.
We were determined to work it out, be patient, make a plan and stick to it, and have faith in ourselves that we’d come right in the end.
Eventually, we did work our way out – and I’m sorry, there’s no magic answers; you’re in the wrong place if that’s what you’re looking for.
Talk to anyone who has scrambled out of the debt pit and they’ll say the solution is a bit like losing weight; it’s straightforward, but rarely easy.
Hard work, determination, and sacrifice.
It was a long, tedious and VERY painful learning curve – and along the way I learned more about the way ‘credit’ works in the UK than I ever thought I would need (or want) to know. Getting trapped in a circle of debt, or having a poor credit score doesn’t mean you’re a shameful person – nor does it mean you are unworthy of help. Naturally, there are plenty of shonky companies who will gladly ‘help you out’ – whilst fleecing you and quickly changing your debt into a gaping chasm of despair.
The very first thing you need to do is take a long hard clear look at your finances. Really understand what money you have coming in, what is going out and what it’s paying for. Try this budget calculator as you go through your a month’s bank statements line by line to really pin down what’s going on day in day out.
There’s a great article on NetMums explaining all about your Credit Score (which of course then affects every aspect of your life; even if you can get credit, it will affect how much that credit costs you). But there are plenty of things you can do for yourself, and you really can see the results happening; your credit score can begin to significantly improve as fast as six months. Here’s our first five essential steps to restoring a poor credit rating;
1 – The first step is to check out your credit report
Check it line by line. Even something innocuous like an old (but live) credit card with an old contact address could stop you getting a mortgage. If, for example, there’s an unpaid bill that you forgot about – pay it. Then be sure to ask the company you paid to contact the credit reference agency, noting the matter is resolved.
Check for accounts you don’t have, and bills you know nothing about. If you see anything that worries you, contact the credit reference agencies immediately. Explain the situation and ask that an alert be placed in your file.
2 – Check that you’re on the electoral register
Another simple one; You can apply online here. You can still opt out of the ‘Open Register’, so your details won’t be sold to companies looking to send you their oh-so-interesting mail.
3 – Use a Credit Card
I know, it sounds backwards. But if you don’t have a (good) credit history, then you should definitely build one. And the easiest way to do that is to use a credit card – not much, and always always ALWAYS pay it off every month. Maybe something simple like use it for one weekly grocery shop a month, or to fill the car with fuel. Whatever it is, the key is to spend at least £50, and to clear that amount every single month, on time.
If you’ve a poor credit history, then apply for a particular ‘credit rebuild’ card. They do have high % rates, but as you’re clearing it each month, that doesn’t matter.
4 – Never Pay Late. Ever.
Defaults inside the last 12mths are the worst things for your credit score – and there’s really no excuse to not have the direct debits set up for at least the minimum payments each month to ensure you never default. Then when you have a few quid spare at the end of the month, you can manually overpay a little and bring those debts down quicker. Even paying £1 extra a month over the minimum repayment sum really helps your credit score.
5 – Don’t Shop Around.
Every time you apply for credit it leaves a mark on your file. Apply too often, and you look too desperate, and you’ll be turned down regardless of your status. Some websites offer a free Eligibility Checker which can be used for credit cards. It will map your score against lenders’ criteria, and shows your percentage chance of getting different products; that way you only need apply where you think you’ll be accepted, and it leaves no marks on your file in the process.
Lastly, I came across this brilliant Daily Mirror article a few years ago, which I bookmarked; it might be a few years old now, but the advice still stands well, and the Facts & Myths about credit scores are really worth reading and understanding.