Bad Debt, Terrible Credit Rating, Advice needed on where to Start

A question about : Bad Debt, Terrible Credit Rating, Advice needed on where to Start

Background
I have amassed around Ј10,000 debt. This is mainly due to a

Ј8000 HSBC postgrad loan
a couple Ј500 credit card debts

Basically after I graduated I couldnt get a job and kinda buried my head in the sand for a year and a half and just didnt contact any of the companies I owed money to. My bank account with HSBC was closed and I just lived off my parents.

My situation now is that I've been working since April 04 in a secure job
(local government). Due to my bad credit I could only open a cash account
(Lloydstsb) and was told that within 3 months I should be able to upgrade to a current account. Well this has not happened. I am also not able to show payments on my credit file as I have no credit cards etc

I have a few questions and would greatly appreciate any possible assistance.
I earn Ј24000 per year.

1. Should I apply for an unsecured loan to consolidte my debts? -
even though it'll prob be a very high rate (which companies do i apply at?)

3. What steps should I take to open a current account because
I would've thought that after 9 months of wages going into my
account that llyodstsb wouldve upgraded it to current account but no!

I am still living at home so could afford to pay Ј350 a month (Ј400 max if good deal).
I would prefer to clear it as quickly as possible. My preferred option
would be the loan to clear everything and start improving my credit reference.

Thanks in advance for any advice offered?

Best answers:

• I wouldn't go down the route of high interest loans if I were you. Consolidating loans is never good and if your bank won't give you a current account, they sure as hell won't give you a loan so that leaves the unscrupulous loan sharks.
  If it were me, I would sit down and sort out exactly how much I owed and to whom. If that means writing to each company asking for an up to date figure, then so be it. When you've got a truthful amount, then you can figure out what to pay each company. Write down your incomings and outgoings and don't leave anything out.
  Most companies will accept phone calls to their credit departments so give them a call and offer the amount that you've worked out you can afford. A top tip though is to underestimate what you can pay them. If you work out that you can pay Ј20 a week, offer Ј17 as they will nearly always ask for more. When you agree to Ј20 they will think you're being extra helpful and hopefully be lenient when it comes to penalties etc. One thing about that though is that if you get away with paying Ј3 less, don't spend it, hide it away somewhere (my pocket if you're stuck!) and keep it as a contingency fund in case you need extra one month.
  As a guess I would say that you now have CCJ's against you which will stay with you for quite a few years yet. If you organise a payment plan with each company, make sure you stick to it or your credit rating will get worse. On your 'credit paperwork', it will show when you have defaulted (within 1-3 months of taking the plan out, 4-6 months etc) and how often. It's a killer to look at but it may make you realise that it cannot be swept under the carpet. You can get to see your credit scores by contacting certain agencies ... I know equifax is one but there are others. It costs less than Ј10 if I remember rightly.
  Anyway, on the subject of the current account, why not go to a different bank and speak to them. At the end of the day, banks are businesses and they all want your business. Show them pay slips and bank statements for 9 months and I can't see why they wouldn't let you have a current account. The over riding question you need to ask yourself is 'can I trust myself with one?'
  That's it then. Hope it helped but if not, Debtline and the CAB are really good.
  Best of luck
  Sad Gills Fan
  Best of luck with getting yourself straight, it's tough but you've taken the first step already, it'll be a whole load of letter writing for you for a time !!
• Thanks very much for the reply.
  The loan was defaulted before a payment was made
  as was the case with the two credit card debts.
  I dont believe I have any CCJ's but am confused as
  to what exactly there are. All I have ever received are
  debt collection agency letters threatening CCJS and
  asking for repayment but I dont think I've had an actual
  CCJ (not sure though)
  The HSBC loan was defaulted on 10/2002
  Ј597 credit card 12/99
  Ј497 credit card 11/02
  1. Do I have to deal with the debt collection agency's
  or can I still contact the company's concerned.
  2. If I pay the debt collection agency, are they relaible
  enough to clear the debt on my credit ref.
  3. Can the defaulted amount of my HSBC (it was Ј8172) have
  increased? I last got my credit report in April 04.
  The reason I'd prefer a loan is that I could just clear these
  three debts are definitely keep up monthly repayments.
  Once again thanks!
• I'd speak to the debt collection agencies, who are dealing with the accounts. At this stage, ask if you are incurring anymore interest - it may have stopped, if not check how much you are being charged.
  To be honest, there is no chance of you getting a loan at a reasonable rate, so I'd suggest making pymts to debt collectors.
  Why are you so keen on getting a current account? Although keeping an a/c in order benefits your credit report, the fact that you have unsatisfied defaults & possibly CCJ's now completely overshadows any good conduct. You need to work on these first.
  Why can you only afford to pay Ј400?? If you are earning Ј24k, and living with parents you should be able to cut down on non-essential outgoings. It looks like you are choosing to spend money on luxuries..... If you really want to clear this as quickly as possible, you will make sacrifices and live frugally.
• Allybwoy - you need to have a full, accurate & clear picture of all your finances before you start dealing with your creditors. They are likely to want to see your financial statement so get this sorted out straight away. If you can afford the minimum payments, all well & good. You then need to work out how much above the minimum you can afford, so that you pay the debts down ASAP.
  If you can't afford the minimum repayments, then you need to offer pro-rata payments - the lenders won't accept you making the minimum to someone else, and paying another lender less than the minimum.
  The National Debtline has a Self-Help pack for this. You work through the pack to prepare your financial statement and work out what you can afford. They also give you sample letters and tips for dealing with your creditors. Beware, they employ tactics to get you to pay more - so you must be crystal clear about what you can afford. If you agree to more, then struggl to make the payments, you are likely to be in a real fix.
  So, go to the National Debtline website and work through the Self Help Pack, which you can find under Debt Advice, here
  www.nationaldebtline.co.uk
  Good Luck
• Please note - this is a cross post from the Loans Board. More replies over there
• Sorry for the same post in the loans section I never
  noticed this section at the time.
  I am not being charged on any of the outstanding amounts
  to my knowledge. The reason I ask about the loan is so there is
  evidence that the loans are being paid off. If I pay the companies
  direct there will be no evidence (on my credit file)that I am doing
  so will there?
  I have a two year old whose nursery fees are Ј700 a month of which
  I pay half. I also help my mother with mortgage so no luxuries just trying
  to sort out finances at a sustainable rate.
  Thanks for all help so far
• Most companies are very reluctant to actually take court action unless they know that you are able to pay and aren't doing so. They don't want to increase their write off, and court action is too expensive to undertake unless they have some hope of getting it all back.
  If you work out all your debts and say you owe £10,000 and can only afford £100 a month offer to split that pro rata between your creditors for the next five years in full settlement, You would probably find that they would be prepared to accept that.
  They would be getting 60p in the £1 back. If you go for a formal Individual Voulantary Arrangement usually they end up getting about 25p in the pound after all the fees.