Make your debts a priority

Credit report service MyCallcredit is warning borrowers who are struggling with their credit commitments to take action before it becomes a problem.

MyCallcredit director Alison Nicholson says:

"The vast majority of people are managing their debts without any problem but there is a significant minority of people who are struggling with their debts and that is proved by the increase in the number of mortgages in arrears and bankruptcies.

People need to manage their finances and prioritise their debts to make sure their homes are not at risk and they don't feel the only option left to them is bankruptcy. Bankruptcy stays with someone for life and is by no means an easy option."

  • Three million people in the UK say it is a constant struggle to keep up with credit commitments (1)
  • Mortgage arrears jumped by 20 per cent during 2005 (2)
  • Bankruptcies in the first quarter of 2006 increased by 51.2 per cent on the first quarter of 2005 and Individual Voluntary Arrangements (IVAs) by 141.9 per cent over the same period. (3)
How to tackle debt
  • Acknowledge you have a debt problem, do not ignore debt as it will not go away on its own.
  • Check your credit file to see exactly what debts and credit facilities you have. People can do this free at www.mycallcredit.co.uk by signing up for a month's free trial of its e-alerts service.
  • Cancel credit facilities that are not being used, in writing, with the lender to remove the temptation to use them.
  • Request limits are reduced on credit facilities so they match the existing debt and no further credit can be granted.
  • Keep an eye on your credit report for signs of debts you've overlooked and not paid - a missed payment or default notice can seriously affect your credit rating.
  • If you can't pay a debt off, get in touch with the lender in question straight away. DO NOT ignore red letters. Most lenders are usually quite helpful and sympathetic if you make the first move and will often agree to reduced payments.

"Debt is a taboo subject in the UK and lots of people are embarrassed to say they have a problem, but it doesn't go away by itself and the only way to improve the situation is to take action," says Ms Nicholson.

Editors Notes
  1. Source: FSA research March 2006.
  2. .Source: CML research shows that in 2004 0.8 per cent of mortgages had arrears, in 2005 that figure grew to 0.96 per cent, an increase of 20 per cent.
  3. Source: Government insolvency stats. The Individual Voluntary Arrangement was introduced as an alternative to bankruptcy by the Insolvency Act of 1986.The idea behind the introduction of the IVA was to enable people facing financial difficulties to come to a formal agreement with their creditors rather than having to face bankruptcy. If an IVA is agreed between the debtor and creditor, interest on the loan is frozen, legal proceedings are stopped and the overall debt is reduced.