Paying off all debt - good or bad idea?

MarkR1985

Good Afternoon Everyone.

Got myself into alot of debt over the last 2/3 years. Was ok and manageable pre covid but during the pandemic my credit file has taken a beating. Luckily no defaults or CCJs, i've managed to keep in regular contact with all creditors all with arrangements.

What i do have had is a rental property which i've had to sell to cover the debt. These is enough equity in the house to cover everything
Would you advise paying off absolutely everything in it's entirety? or would it be worth keeping any accounts open that hasn't fallen into arrears to help me rebuild my credit?

Thanks in advance.

NewLeaf1986

Pay off everything.

It will look very healthy to have no debt against your name.

What may also come in handy is to leave one of your credit cards open rather than closing them all.

The presence of an unused credit facility or two on your credit file will show others that you aren't under any sign of debt stress and can live without relying on lines of credit which are available to you. 

ratechaser

As well as well as the credit file aspect, many people benefit psychologically from the security of knowing that they don't owe anything to anyone.

I'm definitely in that camp - barring intra-month credit card balances (that are always paid off), I've had no debt for years and it's a very nice feeling...

MarkR1985

Thanks for the reply - unfortunately the downside of the whole pandemic is that credit cards have been closed by the creditors albeit not had any defaults applied. 

NewLeaf1986

MarkR1985 said:

Thanks for the reply - unfortunately the downside of the whole pandemic is that credit cards have been closed by the creditors albeit not had any defaults applied. 

Then you'll definitely not have anything to gain from leaving a balance open.

Enjoy owing nothing. It's a beautiful place to be, as ratechaser says.

MalMonroe

I agree, pay it all off. Having suffered terrible financial disasters in the past myself (messy divorce), I know what it's like to struggle with debt. It took a while but I managed to get things sorted with the help of StepChange and a DRO. Now I am far from wealthy but am debt free and it's true, it really is a lovely feeling. I have also taught myself how to budget and manage my money. I recently downloaded my bank's app onto my smartphone and can keep an eye on what's happening with my current account in the blink of an eye. I didn't think I would like that facility (and worried that it would not be safe) but it's great. 

I'd always now advise anyone to pay off debts in full and quickly, if possible.