Advice

katyboo123

My Step Dad asked me a couple of weeks to take a look at his credit file and see why he was getting knocked back for a loan application with his bank. When I went to Credit Expert (Experian) and Equifax I found that although he is 'squeaky' clean and paying everything on time, he is over indebted, using 84% of available rotational credit, has maxed out a couple of credit cards and nearing the limit on others. This is pulling his score down to the realms of poor, which isn't really a true reflection given that he'll move hell and high water to pay what he owes rather than missing a payment plus his unsecured debt is less than his annual salary so in terms of MSE tests he's not drastically over indebted.

All that said, he is feeling the strain, he works shifts, and when he does he has around £300 per month left over after everything including food is budgeted for. However, every couple of weeks the volume of work drops and the guys move on to days, where there's no shift allowance and these weeks he only just breaks even. The spare cash he does have when on shifts is used to over pay on his cards, but given they are all on interest rates greater than 10% it's hardly making a difference.

He has a mortgage on his home, but has only got 6k approx in equity, which works out about 87% LTV. His mortgage is with First National and tracks the Barclay's Base Rate.

I have looked through his credit file and estimate he will need to do one of two things:

1. By some miracle, get a consolidation loan. I worked out if he borrowed £15-20,000 he could dramatically stabilise his outgoings, pay off his credit cards and a small unsecured loan and then begin to rebuild his profile.
2. Go down the route of a debt management plan through the Consumer Credit Counselling Service (I think that's their name). I helped produce a recommendation for him with their tools on their site and we've taken some time to read through that.

Benefits and Drawbacks I see:
1. This isn't teaching anyone a lesson, it's an easy way out and consolidation loans are so tricky to evaluate whether they are indeed a good option. But with the majority of his debt being CC there's no way out if he carries on as is, and he's going to be paying them until he dies. I also don't have a clue where to start in terms of lenders who will actually manually underwrite his application and consider something other than his 'black box' Experian score...
2. His credit will become impaired further and by this I mean defaulted. I don't want him to have battled all this time to keep a good profile (which has inadvertantly become bad anyways) to just destroy it completely.

Suggestions?!

Thanks,
Katy

katyboo123

Can anyone tell me their experience of debt management through ccs please?

mildredalien

I haven't had personal experience of DMPs but know from this site that CCCS and Payplan are the best places to go as they are charities that don't charge. Many people have had great experiences with them.

In terms of the debt itself - why was he applying for a loan in the first place? Maybe it would be useful for him to take a look at MSE himself and see if he can get some more specific advice about his income/outgoings? It sounds like he could be in danger of just digging himself a deeper hole with debt by taking out more and more to try and consolidate or pay things off.

Another thing to consider is that actually, the Experian score doesn't mean much in itself. However if he is already getting turned down for loans, applying for others may hurt his credit rating - and nearing the limit of where creditors will go won't help.