Debt and your credit report:

Posted on: April 25, 2016

Written By: Nicola Standen

Debt Help Experts

When your debts reach an unmanageable level it’s natural to seek help to deal with them however it’s surprising how many people put off dealing with their debts through an official channel, for fear of what impact it will have on their credit report.

Surely getting out of debt and not having to struggle pay packet to pay packet and regaining a reasonable standard of living is more important than keeping that gold plated credit file? It appears not.

Sometimes however, you’re doing just as much damage to your credit file and people are surprised when they have a low score.

Let us Have a Look at Some Examples

Say you have 3 credit cards, all maxed out totalling £10,000. You have never missed a payment and therefore assume that your credit report is whiter than white.

WRONG! The problem here isn’t necessarily that you’re penalised for making the minimum payments, this is perfectly acceptable. The issue is that your debts haven’t really decreased that much over a 12 month period due to interest and this has a bigger impact on your score than you may think.

You could still be paying off those credit cards 10 years down the line therefore they will still be lurking about, affecting your credit report.

If you consider a formal debt relief option, you could take the pressure off, reduce your monthly payments and be debt free in 4 years!! Your credit agreements fall off after 6 years anyway, so perhaps you’re not doing yourself any favours?

Credit Report

Second problem, a lot of people hope to get a mortgage in “4 or 5 years” and therefore the possibility of reducing their £600 monthly debt repayments to something more manageable just doesn’t seem worth it. Consider this…..

Due to the new mortgage affordability checks which have been kicking about for some time now, your monthly debt payment will affect your ability to get a mortgage.

Say you earn £2,000 a month (joint) and you go for a mortgage. The first thing the lender is going to do is check your income and expenditure to ensure you can afford to pay them back. If you are paying 30% of your household income to debt, by the time you also take off any car payments and the bills that come with a home, they may decide you just can’t afford it. You’re no better off, you’ve not been able to afford to spend money on yourself, you’re still knee deep in debt and guess what, you’re not getting that mortgage either. Great huh?

Unmanageable debt holds you back and rains on your parade so if you need a helping hand with debt and your credit file is playing on your mind, consider the above.

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