Remortgaging with defaults and bad credit

Ruthven88

Hi forum, I have around £25k credit card debt, with excellent credit and payment history (no misses or defaults). However, it's unmanageable. I can only pay the minimum payments and am still using the credit cards for expenses. It's a vicious cycle. I am considering cancelling my direct debits and waiting for the defaults, and then creating an emergency fund and DMP.

Me and my partner live in a tiny one bedroom house, which is mortgaged. We want to upgrade this house and start a family (both mid 30's). Would it be possible for us to remortgage and buy a new house if I have tanked my credit report with defaults? 

Biologically speaking, we cannot wait around to pay off this debt. And I personally believe life and family is more important than some miniscule debt in the grand scheme of things. Call it selfish or immature if you want. I will live with it.

Maybe I'm being naive, but the way I see it, the logical end goal of obtaining an excellent 999 credit score is getting a mortgage, which I already have. And if I'm no longer interested in getting into any more debt with credit cards or loans, and with the improved disposable income and fund-building potential which comes with defaulting, having bad credit isn't half as bad as society makes it out to be. 

Of course, it will be much more difficult and expensive to remortgage and buy a new property, but this is a hit we are prepared to take.

Can anyone advise? Thank you.

Isthisforreal99

Suggest you first of all read up on what your 999 'excellent' score means to lenders but the long and short of it is absolutely nothing. 

As for the rest of your post, naive is one word for it. No lender is going to lend to someone who doesn't pay their debts. 

You were told similar on your previous thread - https://forums.moneysavingexpert.com/discussion/6619507/feel-like-my-life-is-on-hold-feel-stuck-advice-greatly-needed#latest

Altior

If your credit record is 'good', then you should be able to obtain 0% BT deals pretty easily.

Won't be much different to getting defaults, aside from not trashing your credit record. 

Then crack off the debt in an all out strategy, build up some reserves, get the new property. 

Once you burned through all of the expenses of moving to a new property, and can afford to lose the income associated with it, start the family.

It's not selfish or immature in my view, but down to logic. There's absolutely nothing wrong with well managed credit, that doesn't include double digit interest, as if you are paying double digit interest, you'll be forever chasing your tail. For one of those major expenses (moving and starting a family), let alone two, you need a cash reserve, not net liability. 

Ruthven88

Isthisforreal99 said:

Suggest you first of all read up on what your 999 'excellent' score means to lenders but the long and short of it is absolutely nothing. 

As for the rest of your post, naive is one word for it. No lender is going to lend to someone who doesn't pay their debts. 

You were told similar on your previous thread - https://forums.moneysavingexpert.com/discussion/6619507/feel-like-my-life-is-on-hold-feel-stuck-advice-greatly-needed#latest

If there's a measurable and consequential difference between a score of 200 and 999 how can you say it's meaningless? Unless you're just commenting on it's arbitrary nature. My plan is to default for a period of time before eventually renewing payments to creditors once an emergency fund has been established. Then I will remortgage once I have built up some new payment history. So to call it not paying my debts would be untrue.

Emmia

Ruthven88 said:

Hi forum, I have around £25k credit card debt, with excellent credit and payment history (no misses or defaults). However, it's unmanageable. I can only pay the minimum payments and am still using the credit cards for expenses. It's a vicious cycle. I am considering cancelling my direct debits and waiting for the defaults, and then creating an emergency fund and DMP.

Me and my partner live in a tiny one bedroom house, which is mortgaged. We want to upgrade this house and start a family (both mid 30's). Would it be possible for us to remortgage and buy a new house if I have tanked my credit report with defaults? 

Biologically speaking, we cannot wait around to pay off this debt. And I personally believe life and family is more important than some miniscule debt in the grand scheme of things. Call it selfish or immature if you want. I will live with it.

Maybe I'm being naive, but the way I see it, the logical end goal of obtaining an excellent 999 credit score is getting a mortgage, which I already have. And if I'm no longer interested in getting into any more debt with credit cards or loans, and with the improved disposable income and fund-building potential which comes with defaulting, having bad credit isn't half as bad as society makes it out to be. 

Of course, it will be much more difficult and expensive to remortgage and buy a new property, but this is a hit we are prepared to take.

Can anyone advise? Thank you.

Kids aren't free of cost and will undoubtedly adversely impact your family earning potential as well costing money.

I'm not saying you shouldn't have kids, but I think you're being a bit blase / naive on the long term financial impact.

Also in the short term, given the parlous state of your finances (you can't repay your debts) is a larger property with a bigger mortgage a good idea?

You may have no interest in your debt increasing, but that's not how it always works, bills need to be paid, food bought... Costs increase whether you like it or not.

Ruthven88

Altior said:

If your credit record is 'good', then you should be able to obtain 0% BT deals pretty easily.

Won't be much different to getting defaults, aside from not trashing your credit record. 

Then crack off the debt in an all out strategy, build up some reserves, get the new property. 

Once you burned through all of the expenses of moving to a new property, and can afford to lose the income associated with it, start the family.

It's not selfish or immature in my view, but down to logic. There's absolutely nothing wrong with well managed credit, that doesn't include double digit interest, as if you are paying double digit interest, you'll be forever chasing your tail. For one of those major expenses (moving and starting a family), let alone two, you need a cash reserve, not net liability. 

The problem is even with 0% interest the minimum payments are high and unmanageable, and I just can't do it on my salary. There's no way I can build any sort of reserves currently, which is why I'm considering the nuclear option of defaulting.

Altior

Ruthven88 said:

Altior said:

If your credit record is 'good', then you should be able to obtain 0% BT deals pretty easily.

Won't be much different to getting defaults, aside from not trashing your credit record. 

Then crack off the debt in an all out strategy, build up some reserves, get the new property. 

Once you burned through all of the expenses of moving to a new property, and can afford to lose the income associated with it, start the family.

It's not selfish or immature in my view, but down to logic. There's absolutely nothing wrong with well managed credit, that doesn't include double digit interest, as if you are paying double digit interest, you'll be forever chasing your tail. For one of those major expenses (moving and starting a family), let alone two, you need a cash reserve, not net liability. 

The problem is even with 0% interest the minimum payments are high and unmanageable, and I just can't do it on my salary. There's no way I can build any sort of reserves currently, which is why I'm considering the nuclear option of defaulting.

I don't see a practical difference. If they default you might get F&F discounts eventually, but they come way down the line. Plus you'll have interest and charges added whilst waiting for the defaults, so the DMP value would be a fair bit higher than your unsecured now. You would however get the chance to save some funds up whilst waiting for defaults.

The fact you are hoping to move up the housing ladder swings it for me, as you'll want to get access to a decent retail mortgage. That won't happen quickly on a DMP. 

Myci85

Are you both working full time? Can either or both of you take on additional jobs to pay down your debt quicker? This will be infinitely easier before you have children, when the costs of childcare will make the gain from employment for one of you negligible. 

fatbelly

Ruthven88 said:

Hi forum, I have around £25k credit card debt, with excellent credit and payment history (no misses or defaults). However, it's unmanageable. I can only pay the minimum payments and am still using the credit cards for expenses. It's a vicious cycle. I am considering cancelling my direct debits and waiting for the defaults, and then creating an emergency fund and DMP.

Me and my partner live in a tiny one bedroom house, which is mortgaged. We want to upgrade this house and start a family (both mid 30's). Would it be possible for us to remortgage and buy a new house if I have tanked my credit report with defaults? 

Can anyone advise? Thank you.

Defaults will massively impact your ability to get the best mortgage deals

Since July you have increased the debt by 5k

So the first thing is to try to stabilize your spending so that income matches expenditure.

As you have 3 credit cards and an excellent credit rating you should be looking for 0% deals

Then you're in a position to look at housing options.

ManyWays

It is highly unlikely you would be able to get a larger mortgage when you have unpaid defaults, even if they are being paid each month in payment arrangements or a DMP. If it were possible, it would be at a very high mortgage rate, which you should avoid. 

I think biology has to come first and at 37 the clock is definitely ticking for a woman. Could we see a realistic combined Statement of Affairs, because the two of you need to be in this together.