Helping me get debt free

david789_2

I'm a newbie to this forum and wanted to ask you good people how you suggest a silly boy like me gets debt free. I'm 23 at the moment, and currently out of work (although not for long hopefully). I was one of the daft young people that gradually racked up debt against myself over years and eventually caved in and couldn't pay it off. I'm going to list the names and approx amounts owed - and when they're from. I do need to note here that none of these companies (apart from creation) are chasing me for money at all. They seem happy with defaults against me and that's that:

Nat West (loan) - £9500 default 10/09
Nat West (odraft) - £1900 default 10/09
Welcome Finance (loan) - £4500
T Mobile - £450 default 01/10
Shop Direct - £1600 default 04/10
Creation (credit card) - £450

I've basically buried my head in the sand in the hope it will go away - which it may. But now, my credit score might as well be 0 (well, 160 actually). And being married with kids - I would like to think in 5 years or so (I might be out of work now, but I will be in work within a month) that I'd be able to buy a house.

I (we) bank with Think Banking, which is awful in itself, but with the Nat West defaults, it's nigh on impossible to get another bank account with a high street bank - I would like an idea for this also as the £20 per month we pay think banking could be used more usefully. I wanted ideally to approach nat west with a lower repayment scheme and ask them to set me up a basic account in return. Would this be able to work?

My wife doesn't have the greatest score either, but it's not a touch on me. I'm trying to avoid doing a formal IVA as it restricts jobs I can apply for and when I looked at it previously, the charges are out of this world.

Ideally, I want to write to each creditor individually and offer them something I can afford and almost set up an informal IVA if you know what I mean? Is that possible? If so, are there any document templates around for me to use?

My final question I have is - once I set this all up (hoefully), how long will it take for my credit to start increasing again? I have 2 loans with provident (small) to keep my credit profile ticking over with satisified payments and am on the electoral roll - but need help!

I hope I've typed this ok for the helpers here to read and look forward to hearing what youve got to say to this young fool

Thanks.

David.

Tixy

Hi and welcome, hope we can help you.

Sadly I can tell you that your creditors and debts won't just go away long term.

Right as a starting point if you want to move to another bank then providing you ask for a basic bank account you should in theory be able to get one with any bank as these don't have a credit check. You do need to ensure you specifally request a basic account. That said you need to make sure that whoever you choose for a new bank account is not connected to any bank you owe money to. Otherwise they will just offset any money in your account off the debts you owe them. So don't choose a Natwest account.

The type of informal arrangement you are thinking of is a DMP (debt management plan), this can be done by yourself with your writing to each creditor, with the help of a debt advice charity who won't charge you but will help you come up with a budget and write to your creditors, and will take a monthly figure from you and split it all between your creditors. The third option is a commercial DMP company who do the same as a charity but keep a chunk of your monthly payments for their own fees, meaning your creditors get less. Needless to say we don't recommend the third option.

Have you now found new work? do you know what you will be earning? I would say your next point is to write out a statement of affairs showing what you will have coming in and what needs to be paid out (before debt repayments) to see how much surplus you should have a month. We use this format here - http://www.makesenseofcards.com/soacalc.html .

If you post the results on here people will be able to advise you a bit more. Plus if you go to one of the debt charities this is the sort of information you will need to give them.

Realistically its going to take 5-6years to improve your credit file. Defaults stay on file for 6years and these drastically affect your chances of any credit. I do understand the logic behind the provident loans and keeping your credit file going but on any DMP you should not have any additional credit at all.

Sorry for the long post -hope some of it helps.

david789_2

That helps a lot - especially like the template for in/outgoings. Do you have any recommendations for the det charities? Apologies if this is a daft question - it is all very new to me.

I tried for a HSBC basic account last week and they turned me down. RBS have referred me now so hopefully they'll give me something to go off. Nat West, I had since I was born til I was 21 - and they were a great bank account...wish I had never messed that up - but when people are offering money left, right and centre it's hard to say no when your that young!

I don't know exactly wre I'll beoring yet but I've bit the bullet and am eve taking interviews for call centres now just to get into work. It's ben 3 months and I refuse to let it hit 4.

I understand it'll take years to right the wrongs. My whole issue (and a lot's probably maturity) is I want to be in a position to put a mortgage deposit down when I'm thirty - so 6-7 years for me to right this isn't too bad. Again, any help is appreciated.

Tixy

Debt charities here - IMPORTANT - Where to seek professional impartial advice about your debts. CCCS will run a full DMP for you if you want, others like national debtline or CAB will help you set one up to run yourself. For any it is taking some time to get appointments at the moment (all very busy) so contact them as soon as you can as even with CCCS you may have to wait a week for a full telephone appointment. (CCCS are very good though - and have the useful online debt remedy tool that you can start yourself).

In theory if you can repay your debts (and save up a deposit!) then your credit file might well be in a position to do that in that sort of timescale.

Probably an obvious question but are you on the electorall roll? this can sometimes cause a problem with basic bank accounts.

I'm sorry to tell you this but you don't want an RBS account - they are linked to natwest so in theory could offset your money from your RBS account to your natwest debts.

Have a look at this link here about offsetting and to find an unconnected bank.
What banks are linked with who? (DMP question!)

Soph86_2

You mentioned that you have loans with provident to keep your credit file ticking over - can I suggest applying for Capital One's classic card, or a Vanquis card - you can ask for a really small credit limit and put a small item on each month (i.e. petrol) and pay it back each month. That way, it has the same effect on your credit score as the loans but without having to pay any interest. You can set up a direct debit for the full balance each month too so you don't even have to remember to pay it off.

Just a thought!

david789_2

I kind of want the hands on approach to run one myself so CAB and National Debtline might work for me. One of the reasons I'm in this mess is getting myself out of the habit of keeping on top of things and keeping myself well disciplined. Will definately ring one of those two tomorrow.

I am on the electoral role (and my experian credit file confirms this) - but RBS say that is the reason I was referred. I know RBS and Nat West are owned by the same parent company (correct me if I'm wrong?) - but I read that sister companies can't hold for their linked companies? If what you're saying is true I'm almost snookered as Lloyds, HSBC and Barclays have all said no in the past also (although that could be in part to me not being on the electroal in the past).

I did have one other question - I desperately want to keep the provident loan going - it is only one loan actually, and it's nice to have if anything drastic happened and money was desperately needed (we only borrow little, but can have £1000 instantly if we were ever in dire trouble). Is there anyway I can keep this loan and still manage my own DMP?

Really appreciate all of the help here Tixy

Tixy

Regarding provident - I would say you shouldn't keep it going. Whether it will cause a problem if you do I'm not certain - it might because your other creditors may see it on your credit file. Same goes if you tried to apply for a credit card such as Soph suggest's - the account will show on your file.

When people are on DMPs they really have to accept that their credit file will be wrecked for a few years. Most people start trying to rebuild their rating a year or so before the end of the DMP using the likes of the credit builder cards etc.

Regarding the offsetting its advised not to go even with a sister co. There have been cases on here of offsetting. What about a co-op cashminder account? these are pretty popular on this forum.

no_pennies

as above i recomend co-op cashminder for your banking just phone them up its easy and takes about five mins dont be embarrased just say your going to do a dmp good luck with your debts and your job search

david789_2

Coop! Great idea, I will try that as there is a branch localish to me. It's annoying with all the linked branches now - esp with Santander now joining up with RBS giving the RBS-Natwest-Santander triangle!

On the provident thing - my whole thing is we whittle the ones down that we've got and that leaves us with the ability to get another if we needed. I dont want to use Provy as a rinse and reuse company...as thats exactly how it shouldn't be used. What your saying with the final year - I take it they give you leeway then to allow yourself to build on this then?

david789_2

Well, phoned the co-op and they've referred the decision - would love to think someone else on here has also been referred! Maybe it's due to the multiple credit searches lately in search of a high street bank? I don't know. They do do credit searches mind - has anyone else reading this had this issue with basic accounts??? I need to get away from think banking!!!

Onto CAB tomorrow!