Clearing debts vs small balance

tommytynan123

[FONT=Tahoma, sans-serif]My son is trying to sort out his finances (25, works f/t, same job 3 yrs, net wage c£1000 pcm, lives with us). Has agreed overdraft limit of £1200 and last 6 months has been hovering around balance of £1100 o/d. Also credit card balance of £750 (max limit £800) and store card balance £1200 (max limit £1300) Paying minimum each month and he is now aware that paying minimum each time puts a marker on his file. Has a few non-debt type outgoings eg phone + ins / car insurance / car tax (total about £110 pcm)[/FONT]


[FONT=Tahoma, sans-serif]Been trying, unsuccessfully. to get a High St loan, incl own bank, for about £3K to half his outgoings. He is still trying although I have mentioned that applications one after the other is not good. He said to me that, if he gets a loan, he will clear the debts but keep the accounts open. I seem to remember reading somewhere on here that it can be beneficial for 'scoring' if he keeps a small balance on the credit card / store card (£100 ish) and pays more than the minimum each time.[/FONT]


[FONT=Tahoma, sans-serif]Am I right ???? Thanks[/FONT]

LondonGirl252

Hi

More will be along to answer that have better knowledge soon but I know that applying for credit many times in quick succession looks desperate and will scare lenders away.

Why did he get into this debt? Most of the time consolidation loans just lead to increasing the debt and leaving the cards open is tempting to increase the debt even more. Many on here, including myself, will advise to look at the cause and cut spending and increasing income to pay off the debt and avoid taking out more.

He's in a good position living with you and having small outgoings that he could pay these off very quickly with a bit of graft...

Tixy

If he does manage to get a loan and if he can trust himself to be disciplined then it can be a good idea to keep open card and use it for 1 or 2 things a month and pay in full each month.

But its not surprising if he struggles to get a loan - a potential lender can see he cannot afford more than the debts he has - and can't guarantee he will use the new loan for consolidation.

If he has made more than say 4 applications then he needs to stop applying, work on reducing the debts down for a few months, and then consider reapplying in say 6months.

plum44_2

Mad to saddle himself with a loan- You can bet his spending is not under control and he will end up with a loan plus more debt.
Only answer is to stop the overspending and use every spare penny to pay down the debt.