Poor Credit Rating - my options?!

Ruudfood

I found out a few months ago that my wife had built up large debts on credit and store cards and on her current account overdraft to the tune of over £10k.

I tried to both getting a loan and borrowing some more money on our mortgage but was refused and was advised to get a credit report. I found that my credit rating was poor (672 on Experian) which surprised me as I'd always been very careful with my money. But the reason it was poor was because I "have several credit agreements (excluding mortgages), and the outstanding balance is high".

The "high" balance totals approximately £6,200 in 2 loans which are jointly in mine and my wife's names. Interestingly, my credit report also shows that I have nearly £17k in available credit and I'm using 0% of my total credit.

I have 1 default from 2 years ago on my record which was an overdraft in a joint account with my sister.

So my questions are:
- is my credit rating really poor because of the 2 loans or is it because of my wife's (likely - I haven't checked her score) very poor credit rating?
- will paying off these loans likely to improve my credit score to the point where I can borrow some money or will the fact that I'm associated with someone with a poor rating continue to affect my score negatively?
- my score was last checked in September last year after I'd made the 2 failed applications. If my wife has paid off and closed some of the accounts she had open is my rating likely to have improved and by how much?

I desperately need to buy a new car and I'd rather not even apply for a new loan if it will further negatively affect my score.

So what should my next step be? Any help or suggestions would be gratefully received.

Thanks everyone...

bouncydog1

Unfortunately you are linked to your wife because of your address - the lenders will also not be interested in who caused an account to be defaulted - if your name was on the account, then the default applies to you.

If you are in a position to pay off anything without borrowing further money then you should do so.

However before you do that, you need to have a serious chat with your wife and ask her how she is proposing to pay off her cards and overdraft. A bit of plain speaking may be needed - she has run up the debts they are hers to settle, unless she has run them up for your joint benefit.

In the meantime she should be cutting up the cards she has so she cannot use them any more and be making a serious effort to pay back the money she has borrowed. There is also likely to be an underlying reason for her spending so she needs to address this. Offer all the support you can, but do not offer to bail her out as this is not going to address the problem, which will likely continue if you pay her debts off for her.

As to the new car, looks like you are going to have to wait a while.

Ruudfood

Thanks bouncyd!!!.

So what you're saying is that if my wife defaulted then because my address is the same as hers then the default applies to me too? We haven't defaulted on any joints accounts. And paying off the joint loans is not going to make any difference to my ability to borrow any money?

And, believe me, we've had the talk already. She knows the what she's done and knows what will happen if she does it again.

ILW

The fact that you have joint accounts (whether OK or not) means you are financially linked. This in turn means that any negatives by either of you affects the other.

Cardinal-Red

Also you state that you had a joint account with your sister - this will mean a financial association will exist there also, unless you have specifically had it removed. This could also be a contributing factor.

Ruudfood

Thank you both. Looks like I'm in deep then doesn't it?

Tixy

You will obviously be stuck with the default on the account with your name on it whatever.

But with regards to the other items.
- would it be feasible to close any joint financial products you have with your wife and then to financially disassociate from her with the credit reference agencies? (obviously if you have a joint mortgage this is unlikely to be possible) but if not could the loans be moved just into your name.
-if the overdraft with your sister is closed then I would suggest you financially disassociate from her (fill in a form with all 3 credit reference agencies - easy to do).
-what is the £17k available credit you are not using? If you have this £17k and the £6k with your wife and applied to to borrow another £10k (so £33k in total) this could be difficult even without all the other issues. If you are not using the £17k could you close some of the accounts or reduce the limits down.

Finally have you considered trying to get secured car finance? this is usually easier to get as the loan is secured on the asset.

EDIT - just seen you mentioned a joint mortgage, sorry must have skimmed previously.

Do get wife to get a copy of her credit file. And see if you can at least try to make sure she doesn't default on any further accounts or get in a position where she ends up with CCJs, as this will make things even worse.

Ruudfood

The £17k is probably the available credit on my credit cards. I have nothing due on them.

It would in theory be feasible to pay off the £6k in joint loans that we have and this was the avenue I was exploring - pay off the loans with money I borrow from my family, apply for one in my name for maybe £15k and from that immediately pay the £6k back that I borrowed from my family leaving me enough to buy a car that would last a good 7-10 years.

I have considered getting secured car finance but I know the interest rate tends to be extortionate and, with a 2nd baby due any day now I don't want to overstretch myself financially which is why borrowing on the mortgage would be the best option for us. I actually like my old car but 1) it's small and doesn't hold the pram well and 2) it's currently being repaired to the tune of nearly £900 so keeping it on the road is becoming more and more expensive!!

I suppose the next step for me is to see what my wife's credit rating looks like (from behind a cushion probably! )

Gillianh2

You will need to check your Sisters as well because of the previous Joint Account you will be financially linked with her as well.

Tixy

Even though you have nothing due on the £17k cards they will, as available credit, still affect what new credit you can get. Although that said I think you have more pressing issues.

My point is only that even if all the other issues were sorted this £17k credit could hinder you getting any further unsecured credit.

Sounds like you are expecting the worst at least from her credit report -maybe you'll not to be too horrified!

Ruudfood

I only have 2 credit cards and want to keep both of them as Amex isn't accepted everywhere. So do you think I could reduce the amount of available credit on one or both cards and, if so, would that help (even if only slightly)?

Seems strange that having available credit will affect a rating negatively. Everyone has credit cards right? The difference is that I don't use mine to the tune of thousands of pounds and pay it off every month. Nevertheless, my main aim was to get credit secured on my home by extending my mortgage as we have almost double the value in equity available and yet we couldn't do that either!

This whole credit thing is a nonsense IMO!