About to go head-first into a big pile of debt

Lmh71365

Ok I'll try to explain this as briefly as I can.

I've been on Maternity Leave for the last 7 months, we are barely able to cover our expenses but just about manage it (with like £20-30 left for "spending").

Last month my partner had a week off work, all in all its ended up costing us £500.

I immediately cancelled our gym memberships (the only agreement we have I could cancel) and I've gone back to our "ration food budget" which is £80 a month, this leaves us with a short fall of about £350.

I've paid all our bills but haven't paid our car finance or phone bills (as I cant).

I've gone back to work (2 days ago), and discovered my work have messed up my pay for a few months. They are going to take it off next month's wages, so I will be paid about £1200. My daughter's nursery is £860, my work are taking about £600. So I'm probably going to be -£200 next month too. On maternity leave I've been taking home about £600 a month, so this is an £800 short fall next month.

In the future, my wages will improve (I am also paid commission so it won't always be £1200 a month), but I'm not likely to take home much more than I do on Maternity Pay after paying nursery fees) and what I do will have to go towards saving for car insurance, service, MOT, etc).

So basically, over the next two months combined we are going to be facing a £1150 short fall, and we won't be able to pay more on our payments in the future to amend this..

So what does this mean for us, what on earth can we do about it, and what kind of an impact will this have on our credit rating if I let our lenders know early??

HappyMJ

Do you "need" the car?

If you don't pay your debts on time you will get defaults and it will destroy your credit rating. After 6 years the defaults will no longer appear on your credit report and your credit history will be back to good again.

If you know your situation will improve in the near future (12 months) then borrowing to make ends meet in the short term is okay. Just keep up those minimum repayments and reduce your expenditure as much as possible.

Can you borrow on a credit card or overdraft to make the car finance payment and pay the phone bills?

Lmh71365

HappyMJ wrote: »

Do you "need" the car?

If you don't pay your debts on time you will get defaults and it will destroy your credit rating. After 6 years the defaults will no longer appear on your credit report and your credit history will be back to good again.

If you know your situation will improve in the near future (12 months) then borrowing to make ends meet in the short term is okay. Just keep up those minimum repayments and reduce your expenditure as much as possible.

Can you borrow on a credit card or overdraft to make the car finance payment and pay the phone bills?

Well. The car is a new agreement (August), so I can't exactly get out of it in any pleasant way. It is parked on a road (and we have nowhere else to put it) so has to remain insured, taxed and MOT'ed. My OH getting the train to work (or me dropping him off/picking him up) will cost as much as his measly fuel bill, but will make things very hard to get my girl picked up from nursery and I will have to reduce my hours to get there in time which will make things harder for me (I need to be able to stay on longer if needed to complete paperwork or continue with customers).

Unfortunately, I can't seem to get a credit card or overdraft at the moment. I think this might be because I have started 3 new finance agreements in the last 5 months. I cancelled my experian ages ago so I can't check now. I think I've used every free trial elsewhere I can think of. It was definitely very good before these 3 agreements - hindered only by my age (24) and a change of address 1 year ago.

God. I can't believe I'm about to ruin my credit rating when I've worked impossibly hard to keep it managable!

crazy_cat_lady

You can check your score for free on Noddle or Clearscore.
I know it's easy for me to say but a high credit rating isn't the be all and end all. I was in a similar position to you - then I went on maternity leave, and my dh got ill and was off work for 8 months and then before I knew it I couldn't make ends meet any more and had to go into a dmp. It felt awful at the time, but we survived, and as a family we are closer than ever. I hadn't applied for credit until quite recently and was surprised when I got it (even though I didn't want it - it was an emergency).
What you need to do depends on how short term this situation is. If it's a month or two, great - otherwise you need to reassess and probably trash the credit rating.
Do you get any help with childcare costs? Either tax credits or vouchers?

theoretica

Can you ask your work to spread their reclaim of wages over as many months as their mistake?

Lmh71365

theoretica wrote: »

Can you ask your work to spread their reclaim of wages over as many months as their mistake?

I have asked but been told this can't be done as I should have flagged it.



Just checked my credit - as I thought, I'm in the red due to starting new agreements recently (4 in total as I forgot about my phone contract)

Ok it looks like spoiling my credit rating is the only way to go, such a shame as it was so strong for someone my age I have never fallen behind with payments but two bad months and you're penalised for 6 years!

Thank you for your replies!! It's good to see I haven't missed something obvious x

Kebby

Just thought I'd ask what your partner's credit rating is like? Is he able to get a credit card at all?

Lmh71365

Kebby, thanks for your reply! Unfortunately his is worse than mine so that's a no-go. I've been providing the credit for us ever since we got together!!

northerner999

I really wouldn't worry about your mythical credit rating.
Do you own or rent? If you have a mortgage then a payment holiday is a possibility.