Dealing with debt with the least amount of impact on credit score

[chimchimina]

I have a lot of credit card and loan debts. Im still meeting all the minimum payments but find myself using more credit cards to pay everyday bills like food shopping by the end of the month. So the debt is increasing and getting out of control.

I may want to get a mortgage in the future so although I know whatever I do will impact on my credit rating adversely I'm wondering if it makes a difference as to how I deal with it?

For example, would coming to an arrangement directly with each of my creditors to look at freezing the interest for a period be less harmful to my credit score than setting up a DMP through someone like Stepchange?

A really good way to see if you qualify for 0% credit card is to log on line with each credit card co and download there app.

When you log in it will show you offers that are available to you without having to apply separately possibly turned down. (Which can effect future applications)

Also download money supermarket app and they have a handy free credit score section. Which also shows you deals that are available to you.

You've taken the first step, so keep going and just sorting 1 thing at a time makes a huge difference to feeling on top of things and manageable

As you are caring for your mother, are you claiming the benefit for this? I don't know what it's called - Carer's Allowance? Attendance Benefit?

It would give you a bit more income, which you could direct straight to your debts, on top of the payments you already make.

Plus - is your maintenance really only £30 a month?

Yes, why is you child maintenance so low, is your ex on benefits? Is the CPS involved?

The op can’t claim carers allowance if she earns more than the specified amount per week something like £140

Mmm not sure about the carers premium on Uc though might be worth a benefit check at Cab

budget planner

use this to work out finances, how much you spend. Make a budget and put money aside for less frequent expenses - hair cuts, car tax etc.

Credit cards - these are expensive. Either find a 0% balance interest card, or a low interest loan and consolidate your debts. Sounds scary but you will save loads in interest.

Use the budget planner above to work out how much you can afford each month to the debt. Be realistic. If all your other expenses (food, rent etc) leaves you with £80 per month, then don’t try and pay £100 towards the debt.

well done in facing up to this situation. It’s the first step in getting it sorted.

Prescriptions and dental - seems high. Do you actually need to spend out £720 per year on these? How much dental treatment do you actually have?

Do you have a pre-payment certificate for prescriptions. It works out cheaper if you have several prescriptions per month.

Do you need to spend so much on the dentist. Could you half this quantity and put it in a savings account, so you have it if you need dental treatment?

Salary take home pay £2800
Child benefit £145
Child maintenance £30
Universal Credit £95

Outgoings:
Debt repayments: £1200
Rent: £825
C Tax: £180
Gas and electric £280
Car Insurance, road tax, maintenance £100
Dentist and prescriptions £60
School meals £ 80
Car lease £242
Food £ 480
Petrol £75
Internet and tv £65
Mobile phones £60

Essentially my outgoingsSalary take home pay £2800
Child benefit £145
Child maintenance £30
Universal Credit £95

Outgoings:
Debt repayments: £1200
Rent: £825
C Tax: £180
Gas and electric £280
Car Insurance, road tax, maintenance £100

Dentist and prescriptions £60 - do you not get free perscription etc through UC - I'm still on the old tax credit system so not sure on this one.

School meals £ 80 - make homemade

Car lease £242 - look at trading for a cheaper car.

Food £ 480

Petrol £75 - walk anywhere that is within 2 miles.

Internet and tv £65 - cancel subscriptions for the Summer or only use one.

Mobile phones £60 - look at changing to Sim only, plenty of good, cheap deals to be had mine and DDs come to le

Ugh sorry my phone posted way too early and I was editing out as I was going.

Also try the free debt repayment app, the icon has a white bird on it. It shows how much you owe and calculates how long each will take to pay off and shows you the most effective way to do it. It's great for accountability to yourself.

Reduce your costs as much as possible without incurring early exit fees eg giffgaff £10 sims when your phone contracts are up, reduce tv package, look at car cost etc. can you get more child maintenance? Can you reduce food by a few pounds? Can you increase income eg take casual work when you haven't got dc?

Then contact your debtors and see if you can have a one year interest freeze, this would give you breathing room. Any extra money pay off the highest interest debt.

Unfortunately your situation is typical of what I see as a debt counsellor and running a food bank, it's not the income but the debts that are the issue.

Best of luck,

I went on the Martin Lewis forums for advice and was told don't rush into a DMP, because of the length of time it affects your credit score. It's only once you clear your DMP that the six years kicks in, whereas if you stop making payments and default (then the debt is sold to another company and you make an agreement to pay with that new creditor), it's six years from the time of the default for it to clear from your credit score.

Coming to an arrangement with your creditors directly has the same effect as a DMP, they will mark in on your credit file. The debt will remain on your file, and therefore affect your creditworthiness, for six years after the last "event".

Basically if you can't pay the best (or least worst...) outcome is that the lender puts a default on your credit file and that falls off after 6 years.

Formal solutions such as bankruptcy and debt relief order haunt you for longer as lenders will ask about long after it falls off your credit file and you're often seen as more of a risk than if you come to an arrangement and actually repay the debt, no matter how long that takes.

Honestly post on the money saving expert forum - there are people on there who are expert at this stuff and can advise you about the lest damaging way to go about it all.

Thanks for all your replies. I've been on the MSE forum and have a plan. Essentially, as a PP stated, defaulting on payments first, building up an emergency fund , and only then applying for a DMP. Apparently that would mean my credit is only fucked for 6 years, would otherwise be longer.

Any further tips for budgeting appreciated though.
To answer a few questions:

1 adult, 2 children and 1 large dog in the household. And no I'm not getting rid of the dog,! I could possibly reduce the "food" shopping down, but that figure includes all toiletries, household items like washing powder, dog food.

Prescriptions, no not automatically free on UC, neither are free school meals unfortunately due to the amount I earn. I will def try the prescription pre payment thing though, so thank you.

Dentist, that's the most basic Denplan for myself and my two children. Only way I can get a dentist. I'm searching for an NHS dentist so I can stop Denplan but no one's taking on around here.

Child Maintenance 😡😡😡. Yes, he's an arse. It's done through the CMS ( there's an agency that's not fit for purpose). He's on benefits so that's all he has to pay. Obviously he hasn't told them about all the cash in hand work he does. No shared care, he contributes NOTHING else in terms of clothes, uniforms etc. I keep asking though it doesn't help.

Car is a lease car. I've looked into a cheaper one but would save very little. Couple of small scratches I will need to fork out a small fortune on too when I turn it in.

Phones ( myself and my daughters). Mines got a couple of years left on the contract but when it expires I'll def get a sim only deal.

Broadband/ tv, tied into contracts. And tbh, I never go out, my kids don't do any clubs or anything, so I'm loathe to cut down on that as our little luxury.

Glad you've got a plan, OP. I found MSE forums so helpful. While defaulting's not the ideal situation, it's mentally freeing to have a plan and see a way through to the end.

If you are fretting the about availability of future credit, I would suggest you have not learned anything from your present crisis.

There are no two ways about it. You HAVE to live within your means, otherwise you will get into trouble again.

I assume op is worrying because they would like to buy a house one day?

Lauranorda - thanks for the judgemental comment, it was really helpful 😡 As a PP stated I was considering getting a mortgage in the longer term. But more pressing, is the fact that even to rent a property you have to have a credit check these days.

I was concerned about being able to find a home for my two children. As we know what a lack of security there is in private rentals.

Looking at your numbers a couple of things which I wondered about:

If you’re a carer for your mum is she in a position to contribute towards your household? Obviously if she’s struggling on a small pension then the answer is no but if she’s doing well financially I think it would be reasonable to ask.

Sometimes having a really cheap month is a good way to get started. Could you have one month where you use up things in the fridge and freezer and do minimal shopping, try and reduce car use to cut down petrol, don’t buy any clothes etc, no spending on extras at all etc. Then use anything you save to create a bit of a buffer so that you’re not dipping into credit for future months.

How much is the actual debt? Could you take out a bigger loan over a longer period to make the payments more manageable? And just forget about trying to get a mortgage for now? Could you downsize, rent a flat etc? The last thing you want is to be going into at least another £400 debt each month, you will never get out of it.

we have been in this situation. if you cut back would you be able to meet the minimums without using creidt later in the month?

I really empathise, I’ve been there - I recommend a dmp ( I have one)it doesn’t affect your credit file that much because they get 100% of their money back. Please put yourself first and park the debt in a dmp, virtual hug 🤗