Paid Off Debt - Advice Moving Forward

JoRoWaMa

Hi,

This is my first post so please be gentle.

I've been kindly gifted £4,500 to pay off various debts (credit cards, store cards, mobile phone contracts, and payday loans). This has all been dealt with today. After these have been paid off, I am left with another ~£4,000 in debt to Natwest (in the form of a credit card and student overdraft, both of which are being paid off via a debt collection agency).

I have a few defaults on my credit file, and have a pretty diabolical credit score (on Experian, Noddle, and Clearscore). I am fully aware credit scores mean little, but they are still pretty painful to look at.

Anyway, I was recently refused a PCP finance package through Volkswagen Finance, after having had a contract with them for nearly four years now. This was to be expected, but I decided to try regardless.

So, my slightly long-winded blurb comes to this rather subjective question:

By September, when my current PCP contract runs out and I will have to return the car, will my credit have improved to a degree that would suggest I may be eligible for another PCP contract?

Any advice, tips, or tricks would be wonderful (either for my PCP woes, or my general financial health).

Cheers,

J

Ben8282

If, by some miracle. all the defaults, arrangements to pay and other adverse information have dropped off by then, maybe. Otherwise, NO.
Forget PCP. Buy a car that you can afford and stop getting into debt.

Arleen

Save up like crazy and buy something cheap and used in September. And if you can't save enough by September, buy a bike/ride buses/hitchhike. You were granted an amazing gift that wiped over half of your debts, that should free a substantial amount of money monthly - use that to start living within your means, not in debt.

National_Debtline

Hi J and welcome to MSE,


If you have not used the £4.5k gift yet - hold fire! You may be able to consider another choice. If your total debt is around £8.5k and there are already defaults and debt collectors involved, have you considered full and final settlement?


This is where you divide the lump sum fairly between your debts so they all get a proportional offer. You write to each lender with your offer and ask them to accept to write off the shortfall, and mark your credit file as partially settled and with a £0. (We do have a sample letter to help with this if need be).


Now it is true that a partially settled debt is not as good as a fully settled one, but it would be better than an outstanding balance on a default. There is no guarantee that doing a full and final offer will improve your file by September, but neither is the idea of clearing some debts in full and instalments on the remainder. If it is too late and you have already used the money gift, I would suggest you contact one of the free debt charities for more advice about options to tackle the remaining debt. We also have a factsheet about credit files that you may find interesting.


Laura
@natdebtline

System

The Pay Day loans have pretty much screwed your ability to get decent mainstream credit for the next few years even without the defaults. Pay day loans are a massive red flag to lenders.