paying off debt and improving credit rating

cabriolet

Hi all,

I have around £7750 in outstanding debt and would like to clear it. at the moment, have 5 credit cards, a coupl of payday loans and that's it. however, on the last couple of months i have been troke by bad luck where HMRC recalculated my tax code and subtracted more than £500 in one go. plus, i got a couple of £60 in PCN for parking and London CC. this has left me in a serious financial strain and therefore i missed the payment in all cards for the last couple of monts.
I earn £1200 net every month and have around £600 in fixed expenses every month, leaving me with around £600 to play with... however, the total repayments each month for all cards are greater than that amount, simply because of the interest rate.
I am about to take a second job in order to get an extra £200 a month.

My questions are:

1- What is the best way to start to rebuild my credit rating and how long roughly it will take;
2- will settling these debts in full in the next 5 months be any good to rebuild my credit rating (I am finishing a project which could earn me around £3000).

I've tried a couple of debt consolidation companies and although they claim to freeze the interest rates, I'll end up paying them £2000 on top of my actual debt over the next 3 years and my credit rating will not improve.

3- me and my girlfriend want to buy a house (around £140000) in december with a 15% deposit. she has a very good credit rating, but she doesn't know anything about my debts... when applying for a mortgage will she become aware of them?

I know I have been bad with my finances, but I want to be back on track, so please spare me from any judgement. I am looking for good advice in how to deal with this situation.

Tixy

Hi

First you need to work out how much you can afford, if you cannot afford your minimum payments then its likely that you are going to be affecting your credit rating. At the moment you possibly/probably just have missed payment markers, but as you cannot keep up with repayments you need to act now rather than just keep missing payments.
The best way to work out what you can afford is to prepare a statement of affairs, and then look through your fixed costs to see if anything on there can actually be reduced.

Paying off your debts in full will certainly look better on your credit file, but if you end up with defaults on file before you pay it off then your rating is likely to be seriously damaged for 6years regardless of whether your debts are paid off.

It sounds like you have been talking to commercial DMP companies which are not actually consolidations but a debt management program. On a DMP no matter what you are told its never guaranteed that interest is frozen, some creditors will, some may not agree to it. If a DMP is the right option for you then you can use a free provider who will charge you nothing in fees - please see this link IMPORTANT - Where to seek professional impartial advice about your debts.

Re the house/mortgage girlfriend. What will matter is how bad your credit file gets before you apply for a mortgage. If you enter a DMP then you will likely struggle to get a mortgage/ if you continue not paying creditors you will likely struggle to get a mortgage.
If you applied for a joint mortgage then you would need to put down on that form what income/debts etc you have, so at that point gf would see them. If they were paid off before then then she wouldn't know about them.
If you were accepted for a joint mortgage you would become financially associated. This would mean anything on your file (and old defaults etc) could affect her ability to get credit, that said even once you are linked she will not actually be able to see what your credit file shows.