Poor credit question

[ShortWarning]

My credit history is poor (even though credit expert says it's "average"). As such I can't get credit on anything (including new mobile phone contracts etc).

This isn't a major problem at the moment but I'm getting to that age where I need to start thinking about my future (mortgages and such).

Although my income is steady I am not in the position to be able to pay off all my debt in one go (about 7k, so not bankruptcy levels or anything).

I've been paying off the minimum payments on this debt for a couple of years now with no incident but nothing seems to be improving. I'm not sure if this is because I'm paying debt collecting agencies as opposed to credit card companies?

I know that the best way to improve things would be to pay off all my debt but as I said, I'm not in a position to do that at the moment.

Now if I was to get hold of one of these ridiculously high APR credit cards, spend on it each month then pay it back before the interest kicks in would this help my credit at all? Or will it not make any difference with the outstanding debt?

 

['Harry]

Min payment means you're only covering the interest and maybe a few pennies to a few quid off the actual balance. Need to up the payment to see any real reductions.

 

[ShortWarning]

Yea, I know and I am working on upping the minimum payments but if I was to use a credit card for food shopping for example and pay it off straight away would this improve my credit or is it pointless because of my other debts?

 

[Dup]

Making regular above minimum payments to clear your debt will improve your rating. Choose the highest APR debt and make an effort to pay a higher than usual amount off. Once that is cleared you can point the difference at your other debts. Once it's cleared you can regularly use a credit card to pay for say fuel or other conveniences and pay the full balance every month to show a good use of credit and a commitment to paying for it to keep your credit rating healthy.

The initial step of pushing money you don't think you have to paying off the first debt is tough but you can always lose something in your life like satelite TV, game subscriptions etc etc to make up the difference. Otherwise you'll just stick in that loop. It may also give you drive to better yourself and find higher paid work in the mean time.

 

[ltnmzh]

7k is not a big number mate. Take on another part time job?

 

[NXZT]

As said before the minimum payment will not make any material reductions in your debt levels but you will keep paying and paying and paying for interest "till doomsday come". If you pay debt collecting agencies I assume the interest will not be low either.

Effectively you have to options in my opinion.
A. Try to get a credit at reasonable conditions from a established Bank and use it to pay off your debt with the debt collecting agencies and by doing this you might be able to reduce the interest levels you are paying. This will not alter the amount of debt, but might reduce your payments due to the lower interest.
B. You still need to find a way to increase your monthly payments to reduce your debt levels, if you can't do that there is no point even to think about further debt like mortgages imo.

 

[Deleted member 66701]

Once it's cleared you can regularly use a credit card to pay for say fuel or other conveniences and pay the full balance every month to show a good use of credit and a commitment to paying for it to keep your credit rating healthy.

Actually credit card companies hate those types of customers. Whilst it will make your credit score look good many credit card companies will decline on a profile that shows "paid in full every month".

 

[cainer]

If you pay debt collecting agencies I assume the interest will not be low either.

im paying off an old CC debt through a collecting agency, halifax had already closed my acc before they sold the debt on so no further interest is payable in my case, maybe its the same for the OP?

 

[ShortWarning]

im paying off an old CC debt through a collecting agency, halifax had already closed my acc before they sold the debt on so no further interest is payable in my case, maybe its the same for the OP?

Yes, this is the same for me.

 

[The Halk]

Actually credit card companies hate those types of customers.

Whilst it will make your credit score look good many credit card companies will decline on a profile that shows "paid in full every month".

So much wrong in such a short post...

Nonsense. Not only is it nonsense but you've contradicted yourself. Your credit score is individual to each lender, and dependent on a number of circumstances. If they're going to decline you for any reason then that reason will be what sinks your score below a threshold.

Credit card companies love people who pay their balance in full every month. It's a myth that they don't. Credit card companies make a transaction fee every time you use the card, they're happy to collect that fee risk free.

OP : It will show affordability if you cycle your day to day expenses through a credit card each month - it's actually a good idea to do this for loyalty points/cashback, a small amount of credit interest, and also consumer protection.

However please do be careful. If you're in debt up to 7K and can barely afford the minimum payments then you may be tempted to spend more on the card and not pay it off in full. It's so very easy to feel that whatever you need to buy right now is very important but in 40 days when the bill falls through the door it's money long gone and forgotten. All things considered I think you should avoid the credit card for now.

 

[The Halk]

im paying off an old CC debt through a collecting agency, halifax had already closed my acc before they sold the debt on so no further interest is payable in my case, maybe its the same for the OP?

Yes, this is the same for me.

You've defaulted then, you're very unlikely to get any credit until it stops showing on your credit history.