Have I been managing my credit card wrong ? Trying to improve credit rating

[Creditrating]

I have a rubbish credit rating and about 60k of debt

recently got a credit building card and used it but each month I don’t pay the minimum (which is usually 10-13 pounds) I will pay £40 or £50 instead.
just read somewhere that actually you should use it and pay off in full each month and that’s what increases your credit rating so have I now made mine worse ???

What value is your car?

Yes you should be paying it off in full because you need to be reducing your debt each month. So if you're unable to do that so far, getting a second credit card is indeed making it worse.

Not much I dont think im not sure but maybe £5k?

Pay it off in full and cut it up. If you really are only using it to build credit you're wasting your time and money. With £60k debts and Arrangements to Pay of token £1, you are not going to have a good credit score for a very long time.

Yes I’m going to pay it off in full. I won’t cut it up though as it’s handy to have for emergencies

I say this is the nicest way. Your credit score is the least of your worries.

You need to concentrate on clearing the £60k of unsecured debt first and foremost.

Whilst you make £1 token payments, Any other potential creditor can see this and will decline you for future credit sadly.

Personally I'd take the hit on my credit report and look at something more drastic to get rid of this.

Even if you claimed bankruptcy it will only remain in your credit report for 6 years, and as long as you don't want to buy a home or become a company director, the only thing you'll have impact of it in future is accessing more lending at the beat rates on the market.

You'll probably still get access to certain lenders but with just more interest to pay after the 6 years passed.

Honestly, don't worry about the score right now, concentrate on managing the debt you have already accrued. Good luck 🤞🏻

What is your plan to pay off the 60k debt?

Is an IVA the same as bankruptcy ? We had the choice of that or a DMP woth stepchange but they wanted hundreds each month as considered dla income so it wasn’t working at all

Nothing is going to improve your credit record when you are paying less than you are spending on the 'new' card & payments so small you are not reducing your large other amount of debt, you are INCREASING your debt every month.

That means you are still spending more than you have each month even with the lower payments than you had been making.

Minimum payments will never ever clear your debts.

You have to work out why you are spending more than you have coming in (otherwise you'd either be paying more on your other debts or at least clearing the new card every month if not both) & STOP doing it.

Work out how to clear some of those debts.

Personally I would start by getting the new card cleared every month, then work out which of the other debts is either the highest interest or the smallest debt & work on reducing one of those to ZERO before moving onto the next.

You really need to go & find a course about money & learn how to manage yours, it's a really important skill that everyone needs.

Try looking at banks etc.. that often have free info for teens & young adults about money management, it doesn't have to cost any money.

If you have a need for a car (disability mobility issues? self-employed or commute that is not possible by public transport? Etc) then they will take this into account. But it’s not guaranteed you could keep a car. They might let you keep a car of a low value but not a high-value vehicle etc. Here’s the official advice:

24.20 Official receiver to consider carefully the bankrupt’s claim for a vehicle to be treated as exempt
Vehicles should not be treated as exempt property as a matter of course and a proper, active, decision should be taken in each case, taking into account the relevant facts and policies and recording all relevant facts, events and decisions on the file.

It would be expected that a vehicle be treated as exempt property to meet a domestic need (as opposed to an employment need) only in very limited circumstances.

You shouldn’t let it stop you exploring this route.

Honestly I’ve not had a plan lately as our financial situation changed for the worst what I’ve been doing is making token payments so nobody took further action against us and to make sure we could prioritise rent and utilities

If our situation hadn’t changed and we had the previous income I’d have been able to set up properly repayment plans but I couldn’t so thought token payments were better at least better than nothing

@Creditrating Are you in (or could you get into) a position to offer lesser 'settlement' amounts to any of the agencies you owe the debts to? Bankruptcy should only be used as a last resort.

I mean this gently too but you need to have a proper look at what happened. Unless you’ve paid for expensive medical treatment or something, £60k of debt is not a one off short term problem. Over a year it’s £5k of extra spending a month.

Then you’ve taken on a new credit source and run up a balance on it - adding to what you owe.

i genuinely understand it’s easy to fall into debt and I also think hats off to you for trying to address it but you’re still saying no you won’t get rid of the card so the temptation is still sitting there with you. I’m not sure you’re quite grasping what’s going on here yet. The CAB are a great idea.

An IVA is more expensive than a DMP. It’s almost certainly not good for you if you could not afford the Stepchange plan.

You need to understand you’re not going to get out of this hole without a big change in lifestyle, whether that’s DMP using DLA, or bankruptcy, which will mean no access to credit at all, not even ‘handy for emergencies’.

You’ll need to learn to budget so that you don’t have any emergencies you can’t pay for.

£1 payment per month on a credit card is not doable if you actually want to clear it. Are you then spending on these cards?
I’d recommend getting in touch with someone to actually tackle your debt. At this point repairing your credit history is not going to happen any time soon.

I'm completely confused as why you are only paying £1 a month to your creditors and then CHOOSING to pay more interest unnecessarily by taking out more credit you don't actually need. If you can afford to pay a ridiculous amount of extra interest on that credit card, you can afford to pay more than £1 a month on your debts and that should be your priority. Do surveys, take on an extra job, do anything to pay that debt back because at some point your creditors may well decide they are persuing it further with no actual plan to pay it back in place.

Also, you really do need to cut up your credit cards (especially those that are not on zero interest).

In summary : forget worrying about building your credit rating as it's fucked. Make your new Year's resolution getting on top of your debt with the assistance of someone like CAB or StepChange who can look at your finances and recommend the best course of action.

No.

So bankruptcy is a court process, and will basically "write the debt off" ime you owe nothing once you have been declared bankrupt.

And IVA is an agreement with all your creditors, you basically pay a monthly amount to a insolvency practitioner who will then "divide" this money out between your creditors.

I'd go seek advice from citizens advice about this and which way is best for you.

Both options negatively impact your credit score however, bankruptcy more so than the IVA, but both have a major negative impact.

Credit builder cards are for when you have a low credit score and need to demonstrate a credit history. They don't build credit when you already have a history (which you have) - they're still a credit card on your credit file like youre existing ones.
Please pay it off in full as soon as you can and then cut it up, and stay focused on paying off debt you have. That's where you'll improve your credit score.

Yes it was private medical stuff and also a lot of therapy

If you couldn’t afford a DMP via Stepchange, you cannot afford an IVA.

If your income will not recover in a short timeframe, you need to get realistic.

Go back to Stepchange and/or CAB and listen to what they advise.

I mistakenly thought that making payments (even token ones) then using a credit building card would help my overall rating

I’m sorry you’re in this situation and I hope it helped. There’s good advice on the thread, it may be a difficult few years getting this sorted but there is an end and another side to reach if you do.