Think I have a plan, need it to be sense checked

Turnedthecorner

Hello All

I'll try to keep my story brief. I currently have £8500 of credit card debt, £7k with Natwest, £1.5k with HSBC which is interest-free  (Balance Transfer card) until the end of 2020. I currently earn £40k, partner earns about £15k, thankfully both of us are currently working, but the cloud of Covid-19 hangs over our employment futures.

I surprisingly got a £2.3k annual bonus, my plan is to pay all of the HSBC debt & £500 of the Natwest debt, then use the money I was paying HSBC to increase the monthly amount I'm paying Natwest, I now rarely use the Natwest card & have never used the HSBC card, so I'm hopeful that my debt will only reduce going forward.

I'm not on the electoral roll but have a Totally Money credit rating of 620 out of 710, which puts me just 8 points outside of the excellent range, my plan going forward is to get on the electoral register, increase both of my credit card limits, to reduce my overall credit utilisation score to below 25% currently its at 43%, then later this year either apply for a loan or do another balance transfer, anyone have any thoughts on that plan, I'd love some feedback, is there something obvious I'm missing?

Thank you for reading

sourcrates

Hi,

Your credit score means diddley sqat in the real world, most bankrupts have a 999 score on experian, that number is used as a marketing tool, nothing much more.

In essence you want to consolodate your debt, despite earning £55.000 pounds per annum between you, thats basically just giving the banks more buisness in my opinion.

On that kind of salary, why not simply budget more effectively, and put as much towards the debts as you can, you can have that cleared within two years easily.

sharpe106

If you want some advice on budget complete a statement of affairs.
https://www.lemonfool.co.uk/financecalculators/soa.php
As above forget about credit score.
No point paying your interest free loan of first use the money for the highest interest loan. Then work from there.

Turnedthecorner

Thank you for responding.
IMO a higher credit score, should give me access to credit on slightly better terms, be that a loan or balance transfer card, so wouldn't it be better for me to improve my credit score, then consolidate my debts? Otherwise I'll be repaying my credit card which is at standard rates, thus way more expensive to repay than a balance transfer card or loan.

sharpe106

The credit score you see is nothing but a marketing gimmick. They are designed to sell things to people. On your combined salary you should be able to make a fair debt in the debt with a good budget. Which would be far better for you then any better terms. 

RAS

The single most important thing you can do is get on the electoral roll. 

Beyond that find another zero percent card transfer before the Nat West card transfers to ordinary rate.

Do NOT get a loan.

Even if the APR is attractive, you have no ability to over pay, the  monthly cost does not reduce over time and there's often a huge early termination penalty. 

Try snowballing say £5k on a 0%card at the amount you intend to pay off each month and then look at the cost of a 2-3year loan to pay off the same amount.

And don't take out extra credit to reduce your utilisation score as that won't help if your jobs get difficult.

And do you have any emergency fund? If not, cut back your monthly spend now and put aside 3 months essential spends somewhere ring fenced. 

enthusiasticsaver

Forget about the credit score. It is a guide and no indication of whether lenders will find you attractive.

Don't take a consolidation loan out. If the credit cards are 0% then just focus on repaying as quick as you can then BT if the deals expire. 

ceremony

Don't do a loan... if you can get another balance transfer card do that, but for now just pay down as much as you can on whichever card is the highest interest/whichever card is due to expire soonest, and then pay off as fast as you can.

As others have said, do an SOA/budget... your debts don't sound too unmanagable compared to your earnings, but it's hard to know without people seeing a budget.

Borrowing more isn't the answer though. Especially if you're worried about your job in the next few years. Do you have any savings right now? How much are you paying off on the debts? How long will it take to clear them?

[Deleted User]

If I were you I'd pay as much as possible off the NatWest card. Make the minimum payments on the HSBC card, if it's interest free it'll be costing you £0 and you have 6 months before it starts to charge you.
Paying £2300 off the NatWest card will save you £35-40 per month in interest alone (assuming 19.9% Apr) which will mean you can pay £35-40 per month moreomore the capital.
It's tempting to pay off the HSBC card first as you have enough cash to clear it, but the reality is that it doesn't make sense financially.
When your interest free period is coming to an end reassess your situation at the time rather than worrying beforehand.

gwynlas

Agree with above 2.5K to NatWest immediately will greatly reduce your interest payment with them and you should still be able to clear HSBC by the end of interest free period.
How much can you afford to pay off debts each month?
Get on elecoral roll, clear cards but then use regularly clearing balance each month will improve your credit score overall.











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Aspiration

Agree with the above