how can i resolve debt without impacting my credit score? Or is it just impossible?

money_fish_2

Hi,

I have a fairly large £27K debt on credit cards and an overdraft. Most of these are now on high rates of interest as the 0% periods have run out.

My dilemma is this - how can I start solving my debt problem, WITHOUT it impacting my credit file for the next 6 years (!!!), which would actually make my situation worse!! Below I explain what I have done so far. Does anyone know of any way to solve my dilemma with interest rates making my debt spiral?

This is a (hopefully short -term-ish problem) as I am off sick with depression and anxiety for 1.5 years, but still employed, just at 75% pay. Once I am back at work, I should be able to pay off debts, but until then, all I want is to have lower interest rates so that my debt does not spiral, until I am back at work healthy - I dont want the debts written off or anything like that.

I have tried the following:
1) Contacted each of the 5 credit card companies, explained my situation and nicely asked if:

A) they would consider reducing my interest rate for a short period, as . ANSWER = NO
if they could move me to the rate that they are offering to new customers. ANSWER = NO
C) switch my account from the existing account to one of their 0% credit cards (i.e. not increasing the debt, just moving it). ANSWER = NO. I WOULD HAVE TO APPLY FOR THE NEW CREDIT CARD, AND THEN TRANSFER MY BALANCE ACROSS. (Not possible for me, as it would appear as if I was increasing my credit limit and I would be rejected as I have low credit score, even though in reality i would just be moving the debt, not increasing it).

ALL 5 CREDIT CARD COMPANIES SAID NO TO ALL THESE OPTIONS. ONLY OPTION WAS TO GO INTO DEBT AGREEMENT WHICH WOULD HAVE 6 YEAR IMPACT ON MY CREDIT SCORES.

D) I applied for a new credit card on a 0% deal.
ANSWER = REJECTED DUE TO LOW CREDIT SCORE.

E) MBNA did come back and wrote to me saying that if I would send them medical evidence (which I have), then they would agree to a plan, but this would impact my credit score as they would apply a "default". I asked again, if they would not just consider a short term interest rate reduction / moving me to a new customer rate. And again they said no.

2) Contacted my bank (including in person branch review) to see if they would reduce my overdraft interest rate, given my circumstances, or switch to one of their 0% overdraft accounts. AGAIN, THE ANSWERS WERE ALL NO. I WOULD HAVE TO APPLY FOR A NEW ACCOUNT, INCLUDING CREDIT SCORING. OR GO INTO THE DEBT AGREEMENT, IMPACTING MY CREDIT SCORES FOR 6 YEARS.


3) Applied for a new bank account, with a low overdraft rate ANSWER = NO, DUE TO MY LOW CREDIT SCORE.


4) Spoken to my mortgage company to ask if I could move to an interest only mortgage, or to have payment holiday.
ANSWER = NO, as my equity is only 15%.

5) Spoke to CCAS and did their online form, and spoke to 4 different people. Again, their only solution (other than some minor budget adjustments, which would make negligible difference) would be to do an agreement, affecting my credit score for 6 years.

(To be honest, I found them quite difficult and bureaucratic to deal with, hence the 4 conversations with 4 different people - as they would not answer any of my questions until I did the form, which I did, then told me I had to reduce my expenditure on the form, which I did because they said if I didnt creditors would not help me, then they told me that because I had reduced the expenditure on my form, I was not eligible for help as I could now supposedly affod minimum payments - even though it was only because they told me I had to reduce expenditure to their fixed guidelines. Then I had to go back to the form to put my expenditure back to the original realistic levels, have another call, and then be told that the only option was a DMP, impacting my credit score. It took about 1.5 hours to come up with an answer that they could have given me in 5 minutes, but they woiuld not let me just ask them the questions!)

That rant aside, does anyone know of how to get credit card companies / banks to reduce the interest rate on a short term basis due to a short term ill-health problem, without it affecting my credit score?

NB - Although, I have a poor credit rating, I have never once missed a payment, I just have a high level of mortgage and debt, and have a lot of recent searches, due to house move, and trying to sort this problem out! I have now stopped trying to apply for things, as I know this will make things worse. I have though got a credit building card with Granite to make £100-ish spend a month, and pay it off in full each month, to increase my credit score.

What more can I do???

Verbatim

Are you registered to vote at your new address?
Basically I think you've given a comprehensive run down of the situation! And I don't think there's a way around it. If you can pay the minimums by reducing your expenditure you'll have to and if you can't and have to pay less then that's a default and it will impact on your credit scores for 6 years from default. But you're already being turned down so in practical terms it might not make that much difference?? If CCCS think your budget is unrealistaclly high for creditors to accept lower payments you could list it here for us to take a look?

thechippy

They won't necessarily get a default, but the account would be marked as arrangement to pay, or another term which denotes full payments are not being made. Unfortunately, this will still affect the credit rating.

carlw

Hi,

It does sound like you have been trying really hard to get yourself sorted which is a really positive start.

I was in a similar situation a few years ago, and i managed to do exactly what you are trying to do. I had never missed a payment, so although i had debt i had a good credit score, and didnt want to ruin it. MBNA are the least helpful in my experience, I helped my brother sort his debts out a while ago, and i couldnt get anywhere with MBNA. So the best option i found for him was a 7.2% loan, which cleared all his debts which were at much higher rates, and he paid the same as he was paying just to meet the minimum payments and his debys will be gone in a few years.

Your bank will almost certainly reduce your overdraft interest rate to zero, if you play your cards right. Im not suggesting you do this, but i lied to my bank and said my hours had been reduced at work and i went through my income and expenditure and the Net result was i had no money left to meet my overdraft fees, so they agreed to reduce my OD rate to zero, and monitor it every 6 months. I also managed to transfer all my credit cards onto 0% and managed to pay everything off a few years ago now. Keep trying and dont be affraid to exploit the fact you are not at work and are struggling, they would rather you pay what you owe than default and go bankrupt or get an IVA.

Have yoy tried speaking to your Bank about consolidating your debts and getting a loan?

If your credit score is already bad, why are you concerned about getting a default on your account?

Good luck.

rising_from_the_ashes

Trying to take out more cards or loans is the last thing to be doing ....... with the amount of outstanding debt you have, unless your incomes is at least £54k then it's highly unlikely that you'd be approved and it's rarely a successful move.

Post up a Statement of Affairs http://www.makesenseofcards.com/soacalc.html and I'm you'll get loads of advice (if your salary is only 75% atm, use that figure as your income)

HappyMJ

A post where someone has actually looked at every option already. I am happy to see that. It's a hard decision to make to go into default but if that is the only way to keep you sane and above the breadline then it has to be done. 6 years does sound like a long time but once it's started you'll find it'll just fly by. The only way most banks will freeze debt is a demonstration by yourself that you are finding it diffcult maintaining the repayments so stopping all repayments and paying £1 a month for several months saving whatever else you can, then offering the smallest amount you think you can then after 5 years offering full and final settlements with the savings you have managed to keep aside will be the easiest way to reduce the debt burden on yourself and keep your house.

Pay the mortgage above all else. Ignore the unsecured creditors if you don't have enough to pay them.

money_fish_2

carlw wrote: »

Hi,

It does sound like you have been trying really hard to get yourself sorted which is a really positive start.

I was in a similar situation a few years ago, and i managed to do exactly what you are trying to do. I had never missed a payment, so although i had debt i had a good credit score, and didnt want to ruin it. MBNA are the least helpful in my experience, I helped my brother sort his debts out a while ago, and i couldnt get anywhere with MBNA. So the best option i found for him was a 7.2% loan, which cleared all his debts which were at much higher rates, and he paid the same as he was paying just to meet the minimum payments and his debys will be gone in a few years.

Your bank will almost certainly reduce your overdraft interest rate to zero, if you play your cards right. Im not suggesting you do this, but i lied to my bank and said my hours had been reduced at work and i went through my income and expenditure and the Net result was i had no money left to meet my overdraft fees, so they agreed to reduce my OD rate to zero, and monitor it every 6 months. I also managed to transfer all my credit cards onto 0% and managed to pay everything off a few years ago now. Keep trying and dont be affraid to exploit the fact you are not at work and are struggling, they would rather you pay what you owe than default and go bankrupt or get an IVA.

Have yoy tried speaking to your Bank about consolidating your debts and getting a loan?

If your credit score is already bad, why are you concerned about getting a default on your account?

Good luck.

Thanks for the info. Yes, I've already tried asking the bank to change it to a loan, and i can't get 0% cards. Good idea about trying again with the bank though, will give it another go!

money_fish_2

HappyMJ wrote: »

A post where someone has actually looked at every option already. I am happy to see that. It's a hard decision to make to go into default but if that is the only way to keep you sane and above the breadline then it has to be done. 6 years does sound like a long time but once it's started you'll find it'll just fly by. The only way most banks will freeze debt is a demonstration by yourself that you are finding it diffcult maintaining the repayments so stopping all repayments and paying £1 a month for several months saving whatever else you can, then offering the smallest amount you think you can then after 5 years offering full and final settlements with the savings you have managed to keep aside will be the easiest way to reduce the debt burden on yourself and keep your house.

Pay the mortgage above all else. Ignore the unsecured creditors if you don't have enough to pay them.

thanks, and nice to see that i have been doing all the right things already. just a shame that there doesn;t seem to be any potential avenues i have not explored. Because this is only a short term problem, and once i'm back at work (i'm relatively well paid), i can clear the debts in no more than 2 years. So that is why I don't want a 6 yr impact on my credit history. I just need that short-term help. what's annoying is that i know as soon as i am well and back at work, and paid off my debt, the banks will be all over me wanting my business again!

money_fish_2

Verbatim wrote: »

Are you registered to vote at your new address?
Basically I think you've given a comprehensive run down of the situation! And I don't think there's a way around it. If you can pay the minimums by reducing your expenditure you'll have to and if you can't and have to pay less then that's a default and it will impact on your credit scores for 6 years from default. But you're already being turned down so in practical terms it might not make that much difference?? If CCCS think your budget is unrealistaclly high for creditors to accept lower payments you could list it here for us to take a look?

Thanks - yes i'm registered to vote, although it took 3 months to get listed on the electoral roll at my new house. my budget was only about £90 a month too high, which in the scheme of things is not a lot of money!

money_fish_2

thanks - although unfortunately that will also impact my credit score! I can make minimum payments, my issue is as I say to stop the amount I owe spiralling further due to high rates of interest.

Tixy

Also just to add that it seems a well thought out first post.

If it is just a short term problem then I guess ideally you just need to maintain the status quo in the interim period. So as long as you can keep on top of the minimum payments then your debts won't be increasing.

Are you able to maintain minimum payments at the moment (without reusing the cards etc)? If not how far short do you fall of being able to?
Perhaps post up a statement of affairs on here for people to see if they can spot some short term changes you can make so you can meet the minimums and stay on top of things until you are earning your fill wages again.

(Sorry I see we cross posted - if you can meet your minimums is that not covering interest at least? so your debt should be remainin static or falling just slightly each month?

Do you know you can opt out of any interest rate rises on the cards?)