Did you know….there are more credit cards in the UK than people?

It’s true.  At the end of 2008, there were more credit cards in the UK than there were people according to APACS.  Today, the UK collective credit limit on credit cards is £158bn, that’s an average credit card limit of £5,129 per person and with the average credit card interest rate sitting at 18.24%, it’s not surprising that we have so many of the population getting into severe credit card debt.

Further research from Moneysupermarket.com unearths the extent of the problem:

  • 1 in 5 of the UK population carries more than 3 credit cards
  • 17% of credit card holders use their cards at least once a day
  • 14 million consumers are using their credit cards to fund day to day expenses

Furthermore, in the next 24 hours, due to debt problems:

  • 390 people will be declared insolvent or bankrupt
  • The Citizens Advice Bureaus in England & Wales will deal with 9,500 new debt problems
  • 219 mortgage possession claims will be issued

This increased reliance on credit cards means inevitably there is a high risk of many people getting into serious debt.  If you are in financial difficulty due to credit card debt or any other type of debt and you need help, talk to us.  Whether it is debt advice, a debt management plan or a more formal debt solution, we can find the right one for you and help you get back on the road to financial freedom.

 

All statistics were taken from Credit Action – May edition

All you need to know about….Credit Scoring

Credit scoring is used by lenders as an assessment as to how likely it is that you will repay the money you borrow from them and that you’ll make the repayments on time.  The lenders allocate a certain number of points for each piece of information on you, for example, your income, the amount of debt you currently owe and your payment history.  Along with the information you provide on your application, these details are used to calculate your credit score.

It’s important to note that different lenders use different scoring systems and they’re not disclosed so although you may be refused credit with one lender, you may be accepted with another.

Lenders will normally consult a credit reference agency to assist with credit scoring.  The 3 main agencies in the UK are Experian, Equifax and CallCredit.  Between the information on your application and the detail that credit reference agencies hold on you, lenders can build up a profile of the type of customer you’ll be from:

  • Your postcode
  • Your salary
  • Your property
  • Previous history with the company
  • Electoral roll information
  • Your available credit, the amount you currently owe and whether you’ve made your repayments on time

You can request the information the credit reference agencies hold on you for a fee.  It’s vital to check that the details are correct including your payment history and your address details.  If you spot an error, ask to have it amended immediately.

 

Debt can affect us all….

Have you ever assumed that it is only the less well off who experience serious debt problems?  Then think again.  Although debt does affect a higher percentage of poorer people than rich, anyone on virtually any income can get into serious debt problems if they do not manage their finances properly.

In fact, it could be argued that it is actually easier for someone on a higher income to get into difficulty than it is for those on lower incomes.  Those on higher incomes are more likely to be property owners, live in desirable locations and be registered on the electoral roll – all of which makes them more attractive to lenders and gives them access to higher levels of credit.

Those with higher incomes and higher credit often have a taste for ‘the good life’ and there is the natural desire to ‘keep up with the Joneses’.  Whether it is a holiday home, a fast car or the latest gadgets, the potential to spend beyond their means and get into financial difficulty is never far away.

In addition, a percentage drop in income for a high earner can have a far quicker impact.

So, don’t assume it’s only one section of society affected by financial difficulties and debt problems.  No matter how much money you have and the level of income you earn, you can still fall into serious debt if you don’t manage your money carefully.

Lottery luck

Did you know that your chances of winning the lottery each time you play are 14million to one, yet according to a YouGov survey, more than a quarter of Brits are relying on winning the lottery to help improve their financial situation!

With the continued recession and the ongoing threat of redundancy across many industries, more and more people are finding themselves with debt worries and it can be all too easy to take a knee jerk reaction and make the wrong choices to try to get your debt cleared.

You need to be aware that there are some roads you probably should not go down in your attempts to escape the clutches of debt.  We’ve listed a few things you shouldn’t do:

Don’t run away

You can’t run away from your debts.  Even if you leave the country for a while and return, you’ll soon be traced through national insurance numbers or credit checks.

Don’t automatically take out another loan

Depending on your circumstances, further borrowing may be unlikely to solve the situation.  It may seem easy to consolidate your debt and pay just one reduced monthly repayment but it can come at a price – some consolidation loans can have high interest rates over many years with your home as security.

Don’t pay off just one creditor

It is important you deal with your creditors equally, don’t pay off one in full and not the others.  By law you are not allowed to prefer one creditor over another.

Don’t think that your creditors won’t be sympathetic

It is worth getting in touch with your creditors and asking them if you can come to some alternative repayment arrangement.  Most creditors will accept alternative arrangements for a short time.

Don’t think bankruptcy is your only option

There are a range of debt solutions which may be available to you, for example, a Protected Trust Deed, IVA or a Debt Management Plan.

Don’t be embarrassed

Speak to family or friends about your debt worries.  They may be able to help you by lending money or even purchasing assets such as your home.

Don’t rely on the lottery

Need we say more….

If you need to borrow money….

Living is expensive and most of us couldn’t get by without using credit for some of the big purchases in life including a home, a car, a new kitchen or even a holiday.  In these situations, credit can be useful but, it must be managed carefully to avoid an accumulation of debt which you may find difficult to pay off.

The trick is to find the cheapest way of borrowing money, keeping repayments to a minimum and only borrowing the exact amount you need.

We’ve outlined some tips to finding the cheapest way of borrowing:

  1. Never be tempted to borrow more than you need, and always aim to pay the amount off as quickly as possible to avoid paying too much interest.
  2. Know your budget and only commit to monthly payments that you know you can afford.  Remember, as well as repaying your debt you should also be putting money aside for any one-off or unforeseen expenses that may arise.
  3. Depending on the amount of money you need, it could be that a 0% credit card is actually the most effective method of borrowing.  Just remember to plan for when the 0% interest rate ends.
  4. If you decide on a loan remember there are 2 types – secured and unsecured.  When taking out a personal loan, an unsecured loan is usually the best option as your home or car is not secured against it.
  5. With any borrowing, make sure you know when repayments are due to avoid unnecessary charges and missed payments being recorded on your credit record.  Set up a direct debit to avoid this.

Family values…..

If you’re planning on expanding your family by having children sometime in the future, you’d be wise to ensure any debt issues you have are addressed before you start planning.

An annual survey from LV= shows that the cost of raising a child from birth to the age of 21 can be anywhere around £201,000.  That’s £9,610 a year, £800 a month or £26 a day!

So you can see why it’s important to get your finances in order now.  There are a number of ways to manage your money depending on the amount of debt you have to ensure your financial situation is in a healthy condition for when the new addition to the family comes along.

It could be a matter of just tightening your belt by budgeting more efficiently or shopping around to make sure you’ve got the best deal on your credit card, mortgage or savings.  In addition, you could register for online banking so you can monitor your day to day finances instead of waiting until the end of the month to reconcile your bank statement.

However, for others with more severe financial difficulties, it may be that you require a formal debt solution to help you on the road to financial freedom and let you save for the future.  This is where we can help.

We offer advice on various debt solutions that you may have heard of including Debt Management Plans, IVAs, Protected Trust Deeds and Bankruptcy.

These debt solutions have helped thousands of people turn their debt around so that they can plan their future without debt worries.

 

* LV= stats taken from Credit Action – July 2010

Do you have a debt problem?

  • Do you hide your credit card bills away in a drawer each month without opening them?
  • Have you applied for credit recently and been refused?
  • Do you find you rely on credit cards to pay for everyday expenses each month?
  • Can you afford to pay only the minimum repayment on your debts each month?
  • Are you regularly going over your authorised overdraft?
  • Would you find it difficult to pay for an unforeseen expense?
  • Have you missed repayments on your rent or mortgage?
  • Have you been receiving regular final demand letters from your creditors?
  • Have direct debit requests been refused due to lack of funds in your bank account?
  • Are you finding it difficult to sleep at night due to financial stress?

Have you answered yes to most of these questions?  If so, it’s time to address your debt problems.  For some, admitting they have financial difficulties isn’t easy but just remember you’re not alone and there is help out there no matter how severe your financial problems.

Don’t have sleepless nights, talk to us about a debt solution.  We can help.