To sell my house to sort out my credit score

[dinosandprincesses]

Ok so this probably sounds like I definitely am being unreasonable but please hear me out first.

We currently live I. A very small two bedroom house, DC share a room but this will soon become an issue as they are different genders and will want their own privacy etc. When we first had the DC we got in to a lot of financial difficulties due to my DH being laid off work unexpectedly and me being a SAHM (I was looking for work but due to childcare arrangements it was almost impossible). We ended up combining all the debts in to a DMP which has worked well for the past 4 years.

Now the issue is that we need a bigger house. We desperately want to pay off our debts but feel like we aren't even making a dent in it. With the DMP we have been told that it will affect our credit rating for 6 years. Which means we have roughly 18 months to pay it off before it then gets added for another 6 years. We have approx £14k in debt so paying it off in 18 months isn't an option.

The only way that we can see around this at the moment is to put the house on the market in 12 months time. We have approx £60k of equity in the house (possibly less if house prices keep dropping). The plan would be to sell the house, use £14k of the equity to clear the debts (it should be slightly less than this by then). We would then find a property to rent for 6/12 months whilst we built up our credit ratings again from scratch. We can just about afford to pay rental prices but would hope this would only be a temporary thing anyway. Then when our credit rating has improved we would apply for a new mortgage, which hopefully we would get approved on as we would have a pretty good deposit.

Does this sound like a fairly reasonable plan?

Snap @Unexpecteddrivinginstructor

At those ages you’ve got years before they need their own rooms. Stick to the plan and don’t sell your house

Sorry if it's already been posted but MSE is great

Money saving expert

Tbh I think you're over estimating how easy it is to get a rental, especially with a crap credit rating.

And I'd be very concerned that the equity you have will slowly be eaten away and you'll never re buy.

Very helpful answer @Jimboscott0115 - thank you.

Do not let the house go.

Personally I would divide up Bedroom 2 for your kids as it appears to have two windows - so a slim wall panel could be put down the middle for full privacy without either child losing natural light.

Hopefully you can see my attached image where I've mocked up your floorplan. The solid line down the centre of the bedroom is a B&Q Alara temporary wall room divider with sliding door panel (the picture above the floorplan is a pic of the room divider from the B&Q website). Their room divider systems are fairly inexpensive and easy to fit DIY by fixing the rods to the floor and the ceiling, and attaching the panels.

The dotted line is a curtain (with curtain track attached to the ceiling) so that the child in the left side of Bedroom 2 can draw the curtain to create privacy from the bedroom door/cupboard area. The cupboard in the bedroom can be shared between the two of them for their clothes - and each child should have space at the end of their beds for a clothes rail or shallow bookcase for their toys and favourite possessions.

I would also use shorty beds since they are less wide and shorter than a standard single (75x175cm) to maximise space - shorty beds should be fine up until age 12/13.

These aren't great suggestions for someone who doesn't have a load of spare cash, are they?

I had a DMP for about 8 years and got a mortgage in 2021. My Experian score was 999 and I owed £660 on it still by that point (had been several thousand originally) so I dont think its 6 years after the DMP. Have you checked your credit score on Experian lately?

As others have said:
Keep the house if at all possible.
Finding a decent rental is highly unlikely and possibly more expensive.
Do everything you can to create more income/lower outgoings - e.g. can you do some of those online surveys that pay you? I know it's a very low pay rate, but could give you an extra 100 a month - would that help? You could do it when home alone if your DH is driving.

There are ways to use bunk beds and put panels around them to create a pod/divider so that each kid gets their own space. If you have enough room to put a bed across the centre of a bedroom, that would create 2 mini rooms. Google bunk bed room dividers for ideas. That's so much cheaper than moving house or even buying a sofa bed.

Your kids will be fine sharing a room for a few more years, so don't even worry about that for now. Once they're old enough to want more privacy, they'll also be old enough for you to work longer hours, so re-evaluate in 3 or 4 years. It's far enough in the distance to not really be a concern right now.

It sucks to worry about money all the time, but it does sound like you have the potential to keep your home and re-establish your credit.

@KickAssAngel thank you for commenting, this sounds like really good advice. I think I've got myself in to a bit of a panic about it at the moment because our finances are so dire but hopefully as the kids get a bit older our opportunities to make more money and make the finances better will improve too.

@MooseAndSquirrelLoveFlannel I'm embarrassed to admit it is currently at about 150.

Hi OP,
I agree you could investigate dividing room 2 (because each room could have a window). Perhaps one of the beds could be built over the stairs to maximise the space.

The S shape bunks are genius.

I absolutely agree don't sell, you will regret it massively, never get back on the housing market because you'll spend all your money on rent which will be more than your mortgage. Be thankful you have bought a house and hold onto it as a priority. I think the easiest cheapest and best thing to do would be to invest in a really good quality sofa bed designed for every day use and sleep in the lounge. It will be absolutely fine even in the long term. I know a family who do this and it works okay. The kids are teens but because they've got reasonable sized bedrooms they don't mind hanging out there when parents want to get the bed out. Teens do this anyway. It's like living in a studio apartment. You're lucky you have a lounge still separate from the kitchen and have downstairs toilet. Off the top of my head Furl do a good one and also made.com or sofology. They have proper mattresses. Or you could get a Murphy/wall bed or a vertical study bed that is a large desk when not in use as bed. There are usually a few of all these in on eBay. I'm looking for an every day sleeping option myself. Then just keep doing what you're doing and keep an eye on your credit rating. Maybe buy premium Experian or something for a month every six months for tips on how to increase it

If you sell, will you ever manage to own again? I'd do anything before selling my house. Second, third job, dogwalking, the lot

Definitely keep the house, you're in a much better position than if you were renting.

For different reasons we're also in a 2 bed with dc sharing. Yours will be OK for a few more years, especially if you give them separate storage space for their things.
You don't mention any outside space but I assume you have a garden or patio. This is the worst time of year as you are cooped up inside. In the spring you could concentrate on growing plants / flowers with the DC. Get some outside furniture 2nd hand to expand your living area when it's warm.

Another trick is to keep your living area as clutter free as possible. See if there anything you can sell to get some more cash.

Basically you need to hang tight and your situation will eventually improve.

Having seen your house layout I honestly wouldn't mess around making changes to it at the moment. Your kids are young enough to be sharing a room for a couple of years yet in a bedroom that looks a generous size for two small kids.
Instead of adding room dividers or whatever, push every spare penny into paying off that debt! In 18-24 months, that's the time to look at splitting rooms if you still can't move.

"I'm embarrassed to admit it is currently at about 150."

I commented yesterday about my previous debt/credit record. But just to add, to hopefully reassure you a bit, my score was low like yours, and at the six-year point when my debt dropped off the credit record my score literally bounced back up high.

Definitely stay put. But when does your current mortgage deal end if you are on a fixed rate as that is likely to impact your finances.

I would just get something like this for bedroom 2 as they get bigger
www.argos.co.uk/product/9497511

You are probably in the worst phase now in terms of toy bulk and storage and when they need a bit of privacy screen it a bit. Get through the next two or three years and reassess things. Your OH is in an industry with high demand, you are doing some hours. Once the debt is gone you'll be in a better place.

In a dmp its really important to get the creditors to default you as soon as possible, as the account will drop off your credit file 6 years after the default date even if its not fully settled (you still need to pay the rest though)- so check every one of your accounts and if they haven't defaulted you and are just marking it as a late or reduced payment then complain and ask them to backdate a default to 6 months after you started paying reduced amounts

This is excellent advice op, please please take note of this and do some further research. There is plenty you can do to improve your score without paying the debts in full or selling your house.

When you're in debt hole you absolutely want your creditors to default you...but creditors not applying a default when in a DMP is a known problem and easily fixed. There are template letters you can send creditors complaining that their failure to issue a default is in breach of ICO guidance and fairness principles - and if you look at the Financial Ombudsman website there are many cases of them upholding complaints and instructing the lender to issue a backdated default. 6 years after that backdated default, the debt is totally gone from your credit file and your score will rocket up overnight.

As the poster said, you still need to pay the rest of the debt even when it's dropped off your credit file 6 years after the default - this is the only way to prevent the lender possibly getting a CCJ as the debt itself still exists. BUT something to bear in mind is that once that default drops off (or is getting close to dropping off) generally lenders will be falling over themselves to offer you a full and final settlement offer. I've seen offers of 80 or even 90% reductions in the remaining balance. Excepting one or two debt collection agencies that are well known for being overly litigious, most companies don't want the hassle of pursuing a CCJ for what's a relatively low debt.

Also op - I don't say this to stick the boot in - but an Experian score of 150 is really exceptionally low.

I've worked with someone recently that has 12 (yes 12!) defaulted accounts that are 4-5 years old, mainly credit cards and a couple of loans, total bad debt of £20k - and their score is in the mid 400's.

With a score of 150 i'd say it's highly likely that some of your debts are not defaulted - an 'ongoing' non-defaulted debt that's been consistently registering a reduced payment/increasing arrears balance for the past 4.5 years due to the DMP would be having a far bigger impact on your credit file than if there was a 4.5 year old default there.