Debt up to my eyeballs. Don't know what to do.

National_Debtline

Hello again.

Matthew32 wrote: »

How long will my credit be affected for (regarding a DRO or a DMP)? I believe that any 'bad' history stays on my credit file for six years, but is it possible for this to negatively affect my credit score after this time?

The DRO will stay on your file for 6 years from the date the order is made. Things are less clear with DMPs as there is the potential for your credit file to be affected for a long period of time. The reason being is that the DMP is an informal arrangement, so your creditors could in theory continue to place late payment markers on the file on an ongoing basis. Creditors should place you in to 'default' once you have breached the terms of the agreement, these defaults would stay on your file for six years. In addition, a creditor could choose to take action through the county courts at a later stage. If they successfully obtain a county court judgment that too would sit on your file for six years.

I want to be able to buy a house one day... And I wouldn't mind moving out of my place into somewhere with cheaper rent sometime soon too! It'd be frustrating and somewhat ironic if I couldn't attempt to cut down my bills because of bad credit.

Thanks,

Matthew

We often speak to clients that are stuck in limbo, with the inability to move elsewhere due to their debts. It can be massively frustrating.

Best wishes,

David.

GenericUsername

Hi Matthew32,

First of all I'm no expert on debt other than currently trying to sort my own but one thing I would say about your situation is to think carefully before entering any formal arrangement. I know DMP's etc are good but one word of warning is that they will affect your credit report. This isn't great if you wish to get a mortgage or rent somewhere new etc.

So, let's take it from the start - first of all try not to be too afraid. You have made a huge step acknowledging that there is a problem there and now it's time to get it sorted. Compared to my debts your debts do not look that big at all (I know they will to you) but I'm seeing from your list that only one debt is massive - £5300.

So here is an action plan of sorts for you to think about.

1. Write down your debts complete with who you owe and APRs. I don't know if your debts have already been passed to collection agencies - have you still been making minimum payments?

2. Work out how much you earn and what you can afford to pay back per month. Obviously it is a lot better if you can pay back more than the minimum otherwise you will have to look again at the DMP option.

3. Start with the overdrafts. Contact the building society and bank. Ask them if they will reduce your overdraft by £100 a month (or whatever amount you can afford each month) until they are paid off. Nationwide did this for me with no issues. Again, with the credit card, it will be minimum payments and throw as much as you can at the largest debt (Balance Transfer) each month until it is gone.

4. Go to https://www.whatsthecost.com and use the 'snowballing' tool to tell you how long it will take to pay back everything.

5. Set up an excel spreadsheet to control money in and money out and put all your spending on it. Use this to cut down on things you don't need to spend. Every debt free journey only works if there is spending sacrifice. Basically anything you spend that is not rent, utility bills and council tax needs to be examined to see where you can cut back. All the money you 'save' should be thrown at your debts.

6. No more forms of credit (to spend more on) at all until all this is sorted and even then. You will see the overdrafts disappearing right before your eyes (albeit slowly) but the credit cards are more difficult because they have interest payments included. This sometimes makes it seem like nothing is getting paid off so you have to play the game. As they start to reduce always try and move the debt from the highest APR card to a lower APR card or a 0% APR card if you can get one.

7. Sell anything that you can and use the money to hit the debt. Nobody needs all the stuff they have. All a person needs is warmth, food and shelter. Any luxuries should go until your debt is sorted. Get a cheaper everything - phone / laptop / groceries bill / internet provider / tv provider / vehicle.
Get rid of - Gym memberships / magazines / newspapers / meals out / treats / drinks at the cafe / lunch bought at work / brands.

8. Mostly understand that it all takes time and prepare yourself for a long haul. This will at least give you patience and get you ready for the fact that one day you will be sorted but it may not be tomorrow or next week. If you can come to terms with the fact that there is no quick fix, it makes the journey a lot easier.

Focus on this - Being MSE + time = Future Freedom.

You may not agree with everything above, but I too have been afraid and the above points are a very condensed version of how I have been able to manage and reduce my debt over the last few years. Even I have a long way to go. I wish you the best of luck but please try not to be afraid. You are now taking steps to help yourself and nobody can take what you haven't got. All you can do is your best. In the great scheme of things the events things that are happening to you (phonecalls, letters) do not matter one jot to the companies involved. It is just policy and nothing personal. So please don't take any of it personally. It's just a game. So make your best moves as you go. The aim of the game is to be debt free and annoy the banks and lenders because you don't need them. You will get there.

tallyhoh

I think you will find your credit is already trashed for six years so don't concern yourself too much with a DRO etc doing the same thing

cocoloco

Hi Matthew,

No point about worrying oabout your credit rating, its already been effected - now its your chance to do some damage control and start a payback plan for your debts. You made a first step by taking notice rather than hoping that the problem will go away (its never do!)and its your opportunity to pay off your debts, start saving for your deposit / morgage and than in the next 10 years get on the property ladder.
It may seem long, but if you don't act now your current problem only going to get progressively worse- what have you got to loose?

Good luck with your journey, we started our DMP with Stepchange 7 months ago for £48.000- I wish I started to this much sooner!

Matthew32

tallyhoh wrote: »

I think you will find your credit is already trashed for six years so don't concern yourself too much with a DRO etc doing the same thing

Haha, I appreciate that 100%. But I was more concerned as to whether taking any formal action would prolong bad credit for longer than those six years...

I mean, if this formal action gets completely wiped from my credit file after six years then great! That means I get a fresh start after that date (late 2019, I expect). But will it only be for those six years? Or will my credit rating be bad for the rest of my life? lol

tallyhoh

I understand that it stays on your record for six years only, any action on your part shouldn't prolong it.