10 Tips To Help Steer You Away From Debt

Recently, there has been a tidal wave of bad news for anyone who relies on credit - and that means almost all of us. Repossessions are at an eight-year high, property values are falling and lenders are turning down up to 60% of applications for credit cards, loans and mortgages - one analyst estimated that 3.5 million people were turned down for cards, loans and mortgages during 2007.nnIt hardly seems surprising that financial counselling services report that 2008 has kicked off with record numbers of calls asking for help.nnThe place to start is your credit report, which lists what you've borrowed and how well you're managing your repayments. It gives you a snapshot of your current status and can help you to see where you should cut back and if you could close some accounts altogether.nnLenders check it when they decide whether to make you an offer and what terms - such as interest rates - to set, so it is crucial that it's up to date and accurately reflects your circumstances. Then check these tips on further steps you can take -and what to avoid. They could help you to make it through the credit crisis.nn1. Don't miss any paymentsnnPay your bills and make repayments on cards, loans and your mortgage on time - you'll only rack up worse debts, incur penalties and damage your credit rating.nn2. Talk to your lenders if you're in troublennThey may help you to work out a schedule of repayments you can afford or arrange a temporary payment holiday while you sort yourself out.nn3. Review your spending, set yourself a budget and stick to itnnIt can help to write down everything you spend over a few weeks so that you can identify unnecessary expenditure. Trim your bills while you're at it. Try price comparison sites to find the best deals on gas, electricity and telephones, as well as loans, mortgages and credit cards.nn4. Resist the temptation to apply for credit to tide you overnnIf you end up borrowing simply to cover your existing repayments, you'll soon rack up debts you can't manage at all. And every application will be recorded on your credit report - if you leave lots of these footprints in a short period, lenders can think you're desperate or even that a fraud is being planned.nn5. ConsolidatennLook at rolling up several debts charging high interest, such as credit cards, into a single, cheaper loan. There are plenty of financial comparison sites with calculators that can help you to identify the best option.nn6. Consider remortgagingnnIf your problem is cash flow but you own a considerable proportion of your home, you could remortgage - but be aware that you'll be charged fees and that you'll be paying off the loan for a long time. You should also bear in mind that, a mortgage is secured against your property, which means that you could lose your home if your situation doesn't improve and you can't pay back what you owe.nn7. Avoid repossessionnnTry not to hand over the keys to your home - a repossession will scar your credit history for years and make it hard for you to own property in future. Instead, look for ways to supplement your income. For example, you could take in a lodger, sell off unwanted clothes or furniture on eBay or at a car boot sale, or get a part-time job in the evenings or at weekends.nn8. Avoid "quick fixes"nnDon't think an IVA or bankruptcy is an easy way out. These stay on your credit report for at least six years and, even after the IVA has finished and the bankruptcy is discharged, you will find it difficult to borrownn9. Get free advicennIf you're still having problems coping, you can get free advice on anything from assessing your situation to your legal position. Try Citizens Advice, the Consumer Credit Counselling Service or the National Debtline.nn10. Check your credit report regularlynnYour personal credit report will change as your circumstances change, so you can see how well you're doing and it can act as a wake-up call if you've let things drift. Make sure that every entry is correct and up to date and reflects your current financial situation. n