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A Snapshot Of The True State Of Personal Debt In The Uk


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I have just done a credit check on behalf of a female friend who has been in financial difficulties since her divorce some four years ago when her husband left her destitute and homeless with debts of around £50000 to pay off. She is paying off the debts, which are mainly to four banks, with an IVA arranged when she was going through the trauma of divorce. But because the IVA monthly payments of £750 do not leave her sufficient funds to live on each month from her take home pay of £1000 from her full time night job that only pays minimum wage levels she is now in default. At the moment the remainder of the £38000 is still outstanding to the banks with little hope of repayment.

The UK credit report shows all of the above information clearly and accurately. Now this is the interesting bit. Her credit score in light of the above is 771 out of a maximum of 1000. This means that her credit score category is rated as FAIR. This ,the report tells her, means that from her credit history over the last four years her score rating is higher than that of 30% of UK consumers applying for credit. :blink:

Being a smug git with a personal credit score of 999 out of 1000 (excellent) words fail me.

What sort of financial mess are people and the UK economy really in for goodness sake ?

p.s

On the basis of her fair credit score my friend has just successfully applied for a credit card to enable her to buy some essentials. As Nu Labour say "things can only get better". :lol::lol:

What sort of financial mess are they actually leaving for the next government :blink:

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I have just done a credit check on behalf of a female friend who has been in financial difficulties since her divorce some four years ago when her husband left her destitute and homeless with debts of around £50000 to pay off. She is paying off the debts, which are mainly to four banks, with an IVA arranged when she was going through the trauma of divorce. But because the IVA monthly payments of £750 do not leave her sufficient funds to live on each month from her take home pay of £1000 from her full time night job that only pays minimum wage levels she is now in default. At the moment the remainder of the £38000 is still outstanding to the banks with little hope of repayment.

The UK credit report shows all of the above information clearly and accurately. Now this is the interesting bit. Her credit score in light of the above is 771 out of a maximum of 1000. This means that her credit score category is rated as FAIR. This ,the report tells her, means that from her credit history over the last four years her score rating is higher than that of 30% of UK consumers applying for credit. :blink:

Being a smug git with a personal credit score of 999 out of 1000 (excellent) words fail me.

What sort of financial mess are people and the UK economy really in for goodness sake ?

p.s

On the basis of her fair credit score my friend has just successfully applied for a credit card to enable her to buy some essentials. As Nu Labour say "things can only get better". :lol::lol:

What sort of financial mess are they actually leaving for the next government :blink:

On the flip side probably another 30% "aren't much better".

I'd love to know how to get a very poor rating. Is it possible?

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I'm with moosetea, she should go bankrupt and save herself a lot of financial worry.

Out of interest, which company did you use for credit score?

I could not agree more. IMO she was badly advised at a time when she was very vunerable and without doubt should have gone bankrupt. I dont know if this is now an option once signed into an IVA but its worth checking for her. The company I used for the credit score was Experian at www.creditexpert.co.uk

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  • 2 weeks later...
I could not agree more. IMO she was badly advised at a time when she was very vunerable and without doubt should have gone bankrupt. I dont know if this is now an option once signed into an IVA but its worth checking for her. The company I used for the credit score was Experian at www.creditexpert.co.uk

If she fails to make a couple of payments she will be bankrupted straight away, go on, give her a push, they lent it to her.

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I'd love to know how to get a very poor rating. Is it possible?

I have succeeded, but it was a good 4 years ago.

I was turned down for a mobile phone contract so I asked to see my credit file with Experian. I even paid for the privelege. All it said is that I had lived with a particular person. The 'report' had no score, just that one bit of information.

My credit report didn't mention this, but my prior flat mate struggled a bit with his money, and had no job in the many years I was there. So my association with him seems to have been all that was needed.

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I'm no economist (just an FTB in waiting) and I wonder whether someone can clarify the link between personal unsecured debt and economic growth. From my basic understanding, does excessive personal spending not contribute to increased economic growth and consequently inflation?

If this is the case, why are there a proliferation of companies & media advertisements urging people to absolve themselves of huge amounts of personal debt?

'...believe it or not, the government actually wants to help with your debt problems. Take advantage of little known Government Legislation to help rid your life of serious debt. If you qualify for an IVA, you could have your debts frozen, a large amount written off and be debt free in 60 months...'

To some extent the government is correct in saying that this is a social problem and borrowing to satisfy ones' material lust is now seemingly considered the norm. Many of us will remember the days when you would 'save up' to buy something, 'save for a rainy day' or 'buy only what you can afford' and I believe our current cultural attitudes towards borrowing & spending may have far deeper consequences than 'just' a potential housing market slump.

Furthermore, whilst I understand from previous posts that for some, personal debt and IVA's aren't always a result of their own excesses or 'living beyond their means', I don't understand how encouraging people in debt to 'use little known government legislation' to 'write off what you can't afford to repay' will effect any change in attitudes. In most cases, you need to have at least £5000-£15000 worth of debt to qualify, almost like a spending goal to aim for! Surely, this will just make things worse and who 'pays' for the 60-95% of personal debt that is written off under an IVA anyway?

In reference to my first question then, how much chance is there that interest rate rises will necessarily slow economic growth and bring down inflation whilst seemingly indifferent cultural attitudes to personal debt prevail. Interest rate rises may greatly affect the budget of an individual/family who has a significant mortgage but otherwise spends within their means whilst they may have virtually no impact on someone without a mortgage who spends way above their means on credit cards, unsecured loans etc. and hopes they can 'bail out' by means of an IVA or such like. Maybe we need a more potent system of personal credit rating/control and to teach our kids some basic economics in school before they get their first pocket money? Or do they just get a credit card with their first mobile phone now - sorry don't have kids!

I understand there are many other factors at play which affect both interest rates, economic growth and inflation and also that a good percentage of personal debt is mortgage borrowing but I would really like to understand what kind of burden unsecured debt actually exerts on the economy in general.

For some I think there may be many 'rainy days' to come...

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  • 2 weeks later...
On the flip side probably another 30% "aren't much better".

I'd love to know how to get a very poor rating. Is it possible?

Yes, save up your money and never borrow anything. They don't like that at all. Someone without any credit history probably has about the same score as someone who has arrears or even defaults.

I could not agree more. IMO she was badly advised at a time when she was very vunerable and without doubt should have gone bankrupt. I dont know if this is now an option once signed into an IVA but its worth checking for her. The company I used for the credit score was Experian at www.creditexpert.co.uk

Problem is that there is no money (or at least a lot less) for advising someone to go through bankruptcy proceedings then there is arranging an IVA. I seem to recall the whole industry was being investigated for this very issue.

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