Nearly DF - How do I go about this?

LifestyleChange19

Evening MSE, I could do with some advice please. I have the following debts totalling £4750:

Barclaycard Credit Card (simple standard rate p.a 17.68%, simple cash rate p.a 25.10%) - £3500
Monzo OD - £750
Natwest OD - £500

I also received a persistent debt letter from Barclays recently too. Luckily I'm coming into a small amount of money and I'll be able to clear the debt in its entirety which I feel is a second chance to get my finances right. My credit score currently sits in the early 800s (according to Experian) and it's taken a knock due to my debt over the last 3 years.

I plan to remove the Natwest & Monzo OD's completely, I also want to pay the Barclaycard off in full and close the account, but a friend suggested that I pay the balance back in full, keep the account open and to not touch it.

What's the best way to deal with the Barclays debt please? My MO is to increase my credit score back to the 900s, although I know this will take some time.

WhenIam64

My MO is to increase my credit score back to the 900s, although I know this will take some time.

Do you intend to use a significant amount of credit in the future? The best credit scores are reserved for those that don't need or use or want credit. It's the credit debt industry playing with your head.

LifestyleChange19

WhenIam64 wrote: »

Do you intend to use a significant amount of credit in the future? The best credit scores are reserved for those that don't need or use or want credit. It's the credit debt industry playing with your head.

Thanks for the reply, no I don't intend to use a significant amount of credit in the future and noted.

BabyStepper

Hiya

My advice is to clear the overdrafts first. They can be called in at any time.

How much do you have to throw at the debts every month?

I'm also not sure why Barclays are contacting you with persistent debt letters. Is it because you just pay the minimum on your card every month? If so, organise a fixed payment every month instead of just paying the minimum.

How much is the small amount of money you are getting and when is it coming?

zippygeorgeandben

Yes you could change the Barclays minimum payment to be £1 extra, I have heard of this working.
Forget your credit score, it's meaningless, it's credit history that potential lenders look at.
Anyway, if i was you, I'd be addressing the reasons why you got into debt in the first place because who's to say that when you receive this money you don't go down the same slope.
Take a look into budgeting so when you do receive this money, you are prepared for what lies ahead.
Good luck!

xebruary

BabyStepper wrote: »

I'm also not sure why Barclays are contacting you with persistent debt letters. Is it because you just pay the minimum on your card every month? If so, organise a fixed payment every month instead of just paying the minimum.

Lenders have to send persistent debt letters if a borrower has paid more in interest, fees and charges than they repaid of the principal balance in the preceding 18 months (and the balance has not been below £200). After 9 months they send another letter if they anticipate the borrower still being in this position after another 9 months and after that second 9 month period they should block the card and convert it to a loan (or take other forbearance action) if the borrower still meets that definition.

This means the extra £1 approach won't work, but the objective is to help people struggling with debts.

I just prepared a report on this at work, the regulations are a little complex but that's the gist of it!

BabyStepper

Thanks xebruary, I had no idea, it's interesting and suggests the banks are being responsible. Is it a new thing?

enthusiasticsaver

BabyStepper wrote: »

Thanks xebruary, I had no idea, it's interesting and suggests the banks are being responsible. Is it a new thing?

They are FCA rules and I think they came in about 2 years ago so relatively recently I guess. I personally think this is a good thing and stops people getting complacent on just rolling debt over and not dealing with repaying it.

Good that you have a chance of clearing it with the money coming to you. I would prioritise the overdrafts first and then if you can clear the Barclaycard in full then I would do so. I would remove the overdraft limits (really they are the worst debts to get rid of and are very expensive with some banks) but I would keep the Barclaycard open and get used to using it occasionally and paying off in full when the statement comes in. This will help lenders see you can handle credit responsibly should you need a mortgage in the future. You will need to be disciplined though so if you do not trust yourself get rid of it.

After that make sure you get to grips with budgeting so you don't rack up debt again and build up some emergency savings.

xebruary

BabyStepper wrote: »

Thanks xebruary, I had no idea, it's interesting and suggests the banks are being responsible. Is it a new thing?

Yes, it became law (as enthusiasticsaver says, through changes to the FCA's Consumer Credit Handbook) in April 2018 and lenders had until September 2018 to be fully compliant.

LifestyleChange19

BabyStepper wrote: »

Hiya

My advice is to clear the overdrafts first. They can be called in at any time.

How much do you have to throw at the debts every month?

I'm also not sure why Barclays are contacting you with persistent debt letters. Is it because you just pay the minimum on your card every month? If so, organise a fixed payment every month instead of just paying the minimum.

How much is the small amount of money you are getting and when is it coming?

Hiya, thanks for the reply. The money coming in means that I can clear all the debt in one go, so I can close the card down or leave a little bit of credit.

My questions is, once I have paid back Barclays, do I reduce the card limit to £1000 and not use the credit or do I close the account completely and move on?

Both OD's are going for sure!

LifestyleChange19

zippygeorgeandben wrote: »

Yes you could change the Barclays minimum payment to be £1 extra, I have heard of this working.
Forget your credit score, it's meaningless, it's credit history that potential lenders look at.
Anyway, if i was you, I'd be addressing the reasons why you got into debt in the first place because who's to say that when you receive this money you don't go down the same slope.
Take a look into budgeting so when you do receive this money, you are prepared for what lies ahead.
Good luck!

I had a good paying job and got a Barclaycard at the same time (stupid, I know) and ended up spending the card on everyday purchases and stupid small things. Took a salary cut straight after that job to do something I love and only have worked myself up back to a similar salary this year.

In hindsight, my spending was outright stupid. Having had a significantly lower salary recently changed me for the better. I cook food now instead of living off takeaway and encourage myself to live far more frugally than before as a few examples. There's still way more to go!

I'm am budgeting using a spreadsheet, but I do admit it does not track every expense...WIP.

P.S Thanks for the replies!