Debt Free (for the 2nd time - and that’s the rub)

leicesterfarthing

TLDR - Am I right to be scared of any debt after  a long history of problems

I’m  56 and been in debt pretty much since I started work at 17. I’ve never been in “trouble” apart from some dicey moments with poll tax in the 90’s, as my income has always been just enough to survive- albeit living from payday to payday. 12 years ago I was 22k in debt on cards and loans with nothing to show for it, and I paid it off with an inheritance, and promised my wife (who is not a spender) that it would never happen again. Fast forward to September 2023 and I’m 32k in debt, all on cards. It was a slow gradual climb, my income was rising, going from 60k to 120k - including sporadic bonuses that somehow were spent twice. I came clean to my wife, and she was understanding and helpful, not judgemental. (I was always contributing and in fact over contributing when it came to holidays etc) 

Here is the issue, after 18 months of hard work I’m debt free (except mortgage) have started an ISA with 2k and want to increase my relatively low pension pot (170k) 

I’ve got 5 cards, with a total of £70k available credit. I’ve “enjoyed” watching my credit score go from good to excellent. Now I’m getting warnings that I’m not using my credit (critical factor- it says)

I don’t think I should use my cards, my plan is to close them one by one over a period of a year - my history says it’s not a good idea use them at all.

As a couple we have an Amex in my name that we used for food shopping with cash back (paid in full each month), but instead I’ve paid in cash into a joint account to cover the groceries in advance for a month and stopped using the Amex (I used to dip into that too, as a “free overdraft”)

Martin’s advice in this situation is to use a card or two and pay it off in full, but I don’t trust myself. Is this normal? Am I being too anxious?

One of my cards I’ve had for 12 years, and that’s shown as a positive on my score

Apart from a mortgage deal renewal in a few months, and maybe a car loan when I retire in 11 years, I have no real need for a high credit score. I can’t afford to let this happen again :-( 

As a side note I was diagnosed with ADHD 6 years ago and impulse control is not my strong point. 

Sorry for the essay - I’d be really interested to hear from others who have been in this situation, and have remained “clean” for a long time 

fatbelly

It's your choice how/if you use credit.

Using an Amex card with cashback for shopping, making sure it gets paid in full each month, has some small advantages. But if you are uncomfortable, close it

You seem to be subscribed to some sort of credit score app whose sole purpose is to sell you things. I'd definitely ditch that. I do an occasional free statutory report. I have no idea or interest in what my fictitious score might be.

BridgetTheCat

Well done getting out of the hole before it was too deep.

Go with your gut and get rid of the cards. It’s not compulsory to use credit and since you feel it’s a weak spot it’s easier not to have access. Save up for things instead. I know it’s an old-fashioned idea, but I find it very satisfying to watch my little savings pots grow and earn interest until I have enough for my holiday or whatever.

Ordinary_Yet_Unique

Ignore credit scores and stop looking at the app! Time to move on and plan for positive things.
I only have one credit card which I use occasionally to keep active. I then pay it off at the end of the month.
Do you really need 5 cards with a tempting £70000 credit available?

RAS

Your credit score is a made up number created by companies trying to sell you things, but irrelevant.

What matters in the UK are your credit records. Check all three of them.

I'd suggest planning to get a car loan in retirement isn't the best thing. If you get a large lump sum, use that to buy second hand? If that's not going to work, start a car fund now. Preferably a tax free account?

powerspowers

Well done on getting out of debt, that’s a real achievement. 

I agree with previous posters, the credit score thing is just marketing and i don’t see a benefit in having CCs if you are worried it will lead to more debt problems. Id work on building savings so you are ahead of any large purchases and have a fund in case anything goes wrong. Then you don’t need credit. 

It also might be a good time to check pension provision if that is something that has taken a back seat due to debt repayments. 

tigergambit

I think you know the answer here - get rid of four of the cards.

At age 56 with a £120k salary and a £170k pension pot you have the basis for a very good retirement. If you have not already done so please, please, please get some advice from an Independent Financial Advisor. They will know of the most tax-efficient way of building your pension pot whilst being flexible enough to cover any of life's emergencies. I have no doubt you are paying far more tax than you need to and this is one of the times when paid for advice will pay for itself.

kimwp

As your wife is better with money, does she have a credit card with a reasonable limit (£10k) is enough for white goods etc. You don't even need that for credit card protection, but it's easier than splitting a payment over several cards. One that's good for using abroad would be sensible if you travel.

Regardless, don't close them over a year. In the next week-
- reduce the limit on your oldest card to £1k (and don't use it)
- use the Amex for food (and petrol?) if you get cashback and reduce the limit on that to 10x what you usually spend on food (and petrol)*
- close all the other cards
Your credit score will probably take a big hit, but then recover.

*Maybe set up a monthly session with your wife to go through spends on the card to help keep your spends in check.

fatbelly

Regarding getting a car in your retirement, start a car fund now, and buy in cash. 

I buy cars generally 3-6 years old and run them as long as I can.

I once considered buying a new car as I had  GM card that was offering a lot of money off a new one. But the initial depreciation wiped out any benefit.

Smudgeismydog

Well done on getting yourself (and staying) out of debt.
Completely agree with the other posters, a credit score is pretty meaningless, and why have all those credit cards? You don't need an available credit card limit, so get rid of it. 

I keep 1 credit card which I use for online purchases and pay off in full every month. I’m a huge fan of keeping life simple, calm and straightforward.

Saving into your pension is hugely tax efficient, so look into your workplace arrangements and if you can, then save more here to build that pot. 

kimwp

I missed the note about the car loan, on a salary of £120k, you absolutely should be saving the money up front.