Credit rating Kerryeastwood

#1
Hello





I am trying to improve my credit rating, and need some advise.

I can afford to pay £200 per month to pay off debt.

I have a very large overdraft and maxed out (£4500) and also maxed out on a credit card (£3100).

Am I better off paying £200p/m to reduce my overdraft, or my credit card?

I'd like to improve my credit rating as quickly as possible.

Thanks in advance for your help!

#2
You need to pay off whichever is attracting the higher rate of interest first. But...with only £200 a month to pay down these debts, I doubt you'd be doing much more than paying the charges each month. Even if the interest was frozen on both of these accounts, you'd be looking at about six years before you paid them off.



I think a post in the debt free wannabe board might bring forth better advice.

#3
Thank you for your reply.

The £200 is in addition to my regular monthly payments to these debts. I just wondered where it would make the most impact according to my credit rating. I've read that by borrowing 95%+ of limit, that goes against me, so I'm inclined to start reducing my credit card down first, but I am not sure if this is better than reducing my hefty overdraft (my bank can reduce my overdraft limit by £200 each month)

Any more advise baring in mind the above?

Thanks

#5
Enquire about a loan which will pay a monthly payment of around what you can afford, be stringent and cancel your overdraft and credit card (or drastically lower the limit on it) to avoid getting back in the same situation.



You a homeowner? Remortgage and pay off, although it would cost you more in interest long term, it could help with your outgoings.



Any monthly extra income set aside in a savings account, this will give you a contingency to fall back on should something happen, rather than getting another credit card or overdraft.

#6
First of all, forget the idea of getting the bank to reduce the amount of the overdraft facility by £200 per month. This will achieve nothing except annoy the bank and look very odd indeed on your credit files.

Having an overdraft facility looks good on your credit files; it is using it regularly that looks bad. If you do want to reduce or cancel the overdraft facility then do so ONCE ONLY when the overdraft is paid off but remember that if you do this and then go overdrawn by even a small amount you will be in an unauthorised overdraft situation which could cost you a lot and be adversely reported on your credit files. Remember also that it is so easy to cancel or reduce but can be so difficult to increase. If you do decide to decrease or cancel the overdraft facility don't expect to be able to get it back again next month!

I assume that the overdrawn account is the account that your salary is paid into and that your overdraft is partially repaid each month and then builds up again? If not would suggest you start having your salary paid into this account as a) this will reduce the interest that you are paying and b) will prevent any action that the bank may take against a person who has run up a £4000 overdraft on an account with very little money being paid into it.

Look at the amount of the overdraft balance being reported each month and compare with account balance to determine approximately which day of the month the bank reports the balance. If possible, try to arrange your outgoings so that the amount of the overdraft is as low as possible on this date to reduce the amount of the balance being reported each month.

You could also try putting some turnover on the credit card. Instead of paying by debit card or cash, pay off a chunk from the credit card and then spend again. This will increase the amount of the payments to the card which will look good and again reduce the total interest being paid.

You have avoided saying what your usual monthly payments towards these debts actually are but from your use of the term 'maxed out' I assume are nothing but the interest on the overdraft and the minimum payment on the credit card?

I would suggest that for the moment you split the extra £200 between the credit card and the overdraft.

By this I mean that each month that passes the maximum use of the overdraft should be £100 less than it was the previous month and that the statement balance of the credit card should be £100 less than it was the previous month.

The idea of a loan to repay entire overdraft and credit card balances is a good one IF you can get the loan but with the current very high utilisation of existing credit that may be difficult. You could use the £200 and whatever you are already paying in interest and charges each month. Go for the shortest term loan you can afford.

Your credit rating will NOT improve until the balances go down (or you get a massive increase in your available credit).

#7
Which one has the highest interest rate? What fees are being charged? Until you tell us what you're being charged nobody can answer the question.



At least you're in a good position to attack both. Debt free in under four years!

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