Paying off debt, now what?

Jagraf

Hello all

During the past 10 years my financial situation has been a mess due to a divorce, which meant selling the joint house etc.

I built up a lot of credit card debt (too embarrassed to say how much) in order to make ends meet.

I am remarried, in my forties, and we have been renting. There is no way we would have even applied for a mortgage due to the debt and the fact that we are both self employed, but we have managed to always pay off minimum payments, never had CCJs and have never gone over the overdraft limits etc. basically we have just about managed to keep the wolf from the door.

During the next two months we will have paid back all of our debt. We earn quite a lot so we can start from scratch and save for a deposit. The bliss of not having debt is overwhelming, but we have no savings.

With regards to credit checks, will the history of how much debt we have had still be on record? Or is it just present debt?

How do I go forward? Should we carry on renting and buy a buy to let when we have saved a 25% deposit. We both have good businesses but I take it this isn't as good as being employed.

I'm very confused, and tired, but feeling life is becoming easier. How should we get back on the property ladder? Should we even be thinking that yet?

thebritishbloke

Your credit history goes back 6 years, so they can see all your balances for the past 6 years. That being said, if you've managed to clear your debt and you've always made your payments and if you're still going to be using the cards and paying them off in full every month, I don't think a lender would look at you in a bad way for it.

If you're self-employed, so long as you can give long enough accounts (I think the minimum is 12 months), then they're usually happy with it. It's all about personal preference, but personally I wouldn't get a buy-to-let when I don't even own my own home.

Tixy

Your credit files will show a history of all credit accounts for 6 years from the date they were closed.

So any potential lender searching your file will be able to see past data on you.

In terms of your credit files, it is a good idea to maintain an ongoing credit history. A typical way to do this at no cost is to keep a credit card open and use it each month for a few transactions and pay in full when the statement arrives so you are not charged any interest.

Moving forward you mention possibly buying a buy to let rather than somewhere for yourself to live - is that because you are happy in your current rental place? or think you may want to move to a different area?

In general it is harder to get a BTL mortgage if you are not already an owner occupier.

Being self-employed isn't a barrier to getting a mortgage, but it can a good idea to use a mortgage broker who will be better placed to find suitable lenders for you.

Jagraf

Tixy wrote: »

Your credit files will show a history of all credit accounts for 6 years from the date they were closed.

So any potential lender searching your file will be able to see past data on you.

In terms of your credit files, it is a good idea to maintain an ongoing credit history. A typical way to do this at no cost is to keep a credit card open and use it each month for a few transactions and pay in full when the statement arrives so you are not charged any interest.

Moving forward you mention possibly buying a buy to let rather than somewhere for yourself to live - is that because you are happy in your current rental place? or think you may want to move to a different area?

In general it is harder to get a BTL mortgage if you are not already an owner occupier.

Being self-employed isn't a barrier to getting a mortgage, but it can a good idea to use a mortgage broker who will be better placed to find suitable lenders for you.

I love the area I live in, but the properties are very expensive. It tends to be flats or pricey houses, with very little in between. We have a daughter so flats would be too small for us (although we did do that a few years ago when she was little), but the houses are too expensive and I would rather save a big deposit and then stay put, eventually.

The house we are renting is nice and we have a fab landlord, so from that perspective we could stay here. I'm just wondering whether it would be better to buy 'something'.

Jagraf

thebritishbloke wrote: »

Your credit history goes back 6 years, so they can see all your balances for the past 6 years. That being said, if you've managed to clear your debt and you've always made your payments and if you're still going to be using the cards and paying them off in full every month, I don't think a lender would look at you in a bad way for it.

If you're self-employed, so long as you can give long enough accounts (I think the minimum is 12 months), then they're usually happy with it. It's all about personal preference, but personally I wouldn't get a buy-to-let when I don't even own my own home.

Thank you - my husband has had his own business for five years, mine is about a year old and I was contracting prior to this so I don't really have any reliable proof of income.

thebritishbloke

Jagraf wrote: »

Thank you - my husband has had his own business for five years, mine is about a year old and I was contracting prior to this so I don't really have any reliable proof of income.

If you're just now starting to save for your deposit, you shouldn't have a problem by the time you come to getting a mortgage

Jagraf

thebritishbloke wrote: »

If you're just now starting to save for your deposit, you shouldn't have a problem by the time you come to getting a mortgage

Maybe I should stop thinking about buying a house and concentrate on building a future

moohound

Save as if you are saving for a deposit, then decide whether to buy or not, and you will either have a decent deposit for a property or a stash of money to do something else with, there is no need to burden yourself with the decision now especially after paying debt off for years, but a big chunk of savings will give you that most wonderful thing, a choice.

Good luck and well done on becoming debt free

Jagraf

Thank you - maybe I'm just putting pressure on myself.

moohound

Jagraf wrote: »

Thank you - maybe I'm just putting pressure on myself.

You have freed yourself from the burden of debt with hard work and a sensible attitude to money, carry that forward to build a prosperous future for your family, which may or may not include buying a property.
Relax and enjoy what you have, don't think of rent as wasted money either, you NEED somewhere to live, and needs are worth paying for.

Jagraf

moohound wrote: »

You have freed yourself from the burden of debt with hard work and a sensible attitude to money, carry that forward to build a prosperous future for your family, which may or may not include buying a property.
Relax and enjoy what you have, don't think of rent as wasted money either, you NEED somewhere to live, and needs are worth paying for.

I have to say its all a bit strange.

We have spent years and years thinking about every penny - in an environment where most of our friends and family are financially secure. Everything we earned semed irrelevant as it was just thrown into the black hole of debt.

I will never spend money I haven't got, on stuff I don't need. I wasn't a massive spender, but circumstances made me look like one.

I'm quite bitter - I see people buying new kitchens when their old ones are fine, relatives buying expensive cars when cheaper ones do the job just as well. It's all quite strange. I don't blame them for spending money, I just struggle with it, and really want to say"do you need that new patio" or "how many pairs of shoes do you need" to friends.

One positive is that over the years we have found cheaper ways to enjoy life, and through that we have developed life long friendships. We do,lots of community stuff.

We've had so many arguments over money, and now that's easing, we are enjoying the freedom. We don't spend more money, we just don't need to blame each other.

It's been a long steep learning curve, but I've learned a lot.