Reducing Debt - being accountable and taking responsibility

DrSpendLittle

I've just realised. This time last year I was £13,400 in debt, doing balance transfers and living in my £1,000 overdraft.

Now I'm only £5,000 in debt, paying extra into my pension and have never felt richer! :T

Can't wait until November 30th!

[Deleted User]

You are doing so well, DSL! What great progress in just a year!

DrSpendLittle

During my 'tea break' in the office I opened and read a letter that CC1's company sent to me yesterday. It's an update of their terms and conditions relating to CC1.

The credit limit on the card is £11k. I didn't want to close it when I cleared it last year because I was concerned about reducing available credit and thus increasing my overall utilisation rate. Plus, I just didn't want to affect the status quo on my credit file (we're considering a house move soon). I think my current overall utilisation rate is 20% (including a £1200 overdraft facility) and my card-specific (CC2) utilisation rate is 48%.

Anyway, I read the terms and conditions in some detail and realised how nice it was that I am no longer a slave to the lender and I no longer have to be bound by the strict changes they are proposing (especially the one about increasing minimum payments if they think you've been in debt too long, eek!).

Ripped up and in the bin!

DrSpendLittle

Moguline wrote: »

You are doing so well, DSL! What great progress in just a year!

Thanks for passing by Moguline! I've just subscribed to your diary and I look forward to reading it tonight over a glass of wine!

Part of me thinks I could have been more gazelle intense and cleared the debt in 12 months. But I had a few months off in March / April. I just needed a break from the intensity of using 43% of my income per month for debt repayments. I'm averaging 30% right now, which is still fairly good, just not A*!! :rotfl:

DSL

[Deleted User]

I think that's still a fairly high percentage though!

I'd revisit the idea of closing that credit card. A large amount of available credit isn't usually looked on favourable by banks as it means you could increase your debt and thereby your monthly outgoings by a large amount in one extravagant shopping spree, which is a liability. I'd close it or at least reduce the credit limit on it. Generally speaking, I think everything under 40% utilisation is seen as good.

DrSpendLittle

Moguline wrote: »

I think that's still a fairly high percentage though!

I'd revisit the idea of closing that credit card. A large amount of available credit isn't usually looked on favourable by banks as it means you could increase your debt and thereby your monthly outgoings by a large amount in one extravagant shopping spree, which is a liability. I'd close it or at least reduce the credit limit on it. Generally speaking, I think everything under 40% utilisation is seen as good.

My thoughts had always been to keep CC1 (for 'catostrophic' emergencies until I had my 3-6 month expenses set up) and close CC2 when it was paid off. This is mainly because CC2 is The Card That Got Me Into Debt and I associate it with all my old bad spending behaviours. It's very symbolic and so cutting it up would be equally symbolic. However, with that said, I bank with CC1 so, hypothetically catastrophizing, the bank could garnish from my current account if I were to get in lots of debt again. It probably makes more sense to keep CC2 temporarily and be done with CC1.

I will mull over but I think you're right, I should probably just close CC1 and reduce the available credit I have (currently £22,450 across three cards) in order to maximise my lending attractiveness for a mortgage. I may consult the mortgage forums first.

[Deleted User]

Yes, definitely something worth considering! I know what you mean though, my emergency fund cc is one I've never spent anything on, it was purely a balance transfer one. I don't even know the PIN for it and intend to keep it that way!
I did however reduce the credit limit on that one from £12k to £5k, and that did improve my credit score a little. - However, my utilisation wasn't affected at that point as I had moved my other remaining cc debt to a personal loan instead, so it might be different for you.

[Deleted User]

Also, I'm not a homeowner yet so any major house disasters wouldn't affect my EF as they would be covered by the landlord instead. But, if you have building and contents insurance, then £5k emergency available credit should tide you over until you have a proper EF saved up.

DrSpendLittle

Thanks Mougline! I've consulted the mortgage forum so lets see what they say.

Luckily DF has plenty of savings so he is in effect my catastrophic emergency fund for house stuff until I build my own

But, I'd still like a CC for other catastrophic emergencies I could hypothetically face such as getting stuck in a foreign country due to ash cloud, terrorist attacks etc etc, at least until my EF is nice and healthy. It may mean keeping CC2 for longer than I wanted and closing CC1 for now.

Just home, looking forward to reading your diary tonight!

DrSpendLittle

A nice little NSD today and we used stuff in the freezer / fridge for dinner. No other significant MSE updates, though my budget is feeling a little tight and there is still a good bit of month left!

I'm out for dinner tomorrow night and I will also need to put fuel in the car, so some spends planned. Thursday I'm unsure on my plans but a friend wants a drink after work so I'll probably have some spends too.

Hoping for a quiet week next week and a meal plan of beans and rice, rice and beans.