CreditExpert offers answers to common financial
questions
Over-spending and high borrowings can be a big problem, as the latest Personal
Credit Index survey from
CreditExpert
recently found. Around 25 per cent of couples argue about finances and
one in 20 split up after rows about money. Here are some of the most
common financial worries – and what you can do about them.
I owe money to several credit and loan companies. If I
get a £20,000 loan, I could pay them off and save hundreds of pounds a
month – but I can’t because I have a poor credit history. What can I do?
First, check that your credit report is up-to-date
and accurately reflects your circumstances.
Your credit report is the personal history of all the credit you have
taken out, such as credit cards, loans and mortgages, plus your
repayment record and further information ranging from court judgements
against you to your registration to vote. It is held securely by credit
reference agencies who receive the information from lenders and public
sources, such as the electoral roll and court records.
If you disagree with anything in the report, contact the lender who
lodged the information or the relevant court and explain your
objection, providing documentary proof if possible. If they agree with
you, your credit report will be amended.
If you see entries referring to credit you have not taken out, you
could be a victim of identity fraud. Contact the lender and provide
proof that they are nothing to do with you.
Equally, if there are special circumstances surrounding an entry, you
can add an explanation – for example, you might have missed some
repayments because of illness. Lenders will see this and may take it
into account in future.
Finally, if you are not registered to vote at your current address, do
it now. Lenders use the electoral roll to verify your identity and
address, as a precaution against fraud.
My unsecured debts have spiralled to tens of thousands
of pounds and it will take me decades to pay them off on my salary. I
can’t afford an Individual Voluntary Arrangement and bankruptcy will
mean the end of my job. What can I do?
Speak to a specialist organisations that helps with debt problems.
Citizen’s Advice Bureaux has a long history of community help. There
are 462 member bureaux, each a separate registered charity, with around
3,000 premises and more than 20,000 trained volunteers – so one will be
near you.
www.citizensadvice.org.uk
gives a list of local offices, while
www.adviceguide.org.uk
provides advice and more contacts.
National Debtline is a telephone hotline – a charity that is part of
the Money Advice Trust and specialises in helping people to resolve
their debt problems. You can contact them on 0808 808 4000. They also
offer advice, fact sheets and budget plans on their website at
www.nationaldebtline.co.uk.
The Consumer Credit Counselling Service,
www.cccs.co.uk, is
one of the leading debt management charities. It also provides useful
budgeting advice. You can call them on 0800 138 1111.
Is an IVA an easy way out of debt?
IVA’s are not the easy option you might think. Although some people may
end up paying less through an IVA, the debt is not necessarily written
off.
An IVA should only ever be considered as a last resort and after
receiving impartial advice. The IVA will appear on your credit report
for six years and it is just as likely that you will struggle to get
credit in the future as if you had opted for bankruptcy.
A credit card company allowed me to get thousands of pounds into debt
when I was signed off work with stress. What can I do about it?
The credit card issuer had no way of knowing about your illness if you
or somebody acting on your behalf didn’t tell them.
It allocated you a spending limit based on the information in your
credit report, their past experience of you and the information in your
application form – and presumably you had previously been a reliable
customer, because you were able to spend quite a large amount.
Now you need to contact the card issuer and explain your circumstances.
You will need proof from your doctor and they may also ask for evidence
that you were not working when you ran up the debt.
They will help to come up with a solution to your problem, such as a
schedule of repayments that you can afford.
This debt will be recorded on your credit report and could affect your
chances of borrowing money in the future, so you should also contact
Experian, the UK’s leading credit reference agency. They will help you
to add a note of explanation to your credit report, which lenders will
see when they check it in response to any future applications for
credit.
You should also check your credit report yourself, to see that it has
been updated and accurately reflects your circumstances.
How can you improve your credit score?
Lenders use credit scores to assess the risk that you will not repay
what you owe. A credit score is a mathematical calculation based on
information from two main sources – your credit report and your
application. Each piece of information is allocated a value and each
lender uses its own formula to calculate a number that represents the
risk you represent. Sometimes the same lender will use a different
formula for different products, for instance a car loan versus a
mortgage.
In general, the higher the score, the better your chance of getting
credit on favourable terms.
Your first step towards improving your credit score is to check your
credit report to make sure that it is up to date and accurately
reflects your circumstances. If you find anything that is out of date
or that you believe is inaccurate, contact the lender or court that
supplied the information, giving proof if possible, and ask them to
make an amendment.
If there’s something that needs further explanation, you may be able to
add a note of explanation that lenders may take into account. You
should also check that you are registered to vote at your current
address, as lenders use the electoral roll to verify your identity. You
could lose points if you don’t appear or are down at an old address.
Avoid fee-charging credit repair companies. They cannot help you to
make any changes to your credit report.
I have some large credit card debts and was thinking of
transferring them to another credit card company offering 0 per cent on
balance transfers. Will this affect my credit rating?
This is called credit card surfing – shifting your balance from one
card to another to take advantage of introductory interest-free or
low-interest offers. It should not harm your credit rating, as long as
you always make your repayments on time and don't do it too often.
Remember that your application for a new card might not always be
accepted and that lenders don’t like to see evidence of a series of
applications on your credit report – they can think you are desperate
for money or even that a fraud is being planned.
You
can see your Experian credit report for free with a free trial of
CreditExpert the online credit monitoring and identity
protection service.
It also gives you a chance to buy your National Credit Score for the
special price of £4.99. This is based only on the information in your
Experian credit report, so it won’t be the same as one calculated by a
lender – but it does give you an idea of how well you’re doing.
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