Unhealthy debts?

Sunday 9th November, 2008 - £7,408.16 in debt…

 This weekend I got some unwanted post from Barclaycard, telling me to get a so-called ”free” credit report from them. Apparently, all I’d have to do to receive my credit report (described as FREE, in capitals, repeatedly) would be to apply for a 30-day FREE trial of CPP Identity Protection Alert insurance.

Of course, when the 30 day FREE insurance trial ends, the insurance will continue at the standard £69.99 yearly fee, unless I call to cancel.

So, Barclaycard, I’ll get a free trial of something I don’t need AND a free something else I don’t need? Wow, you’re spoiling me.

The fact is, payment protection insurance and identity theft insurance are almost certainly useless to most people. Any purchases you make on your credit card are protected by an intricate web of regulations and policies that protect you in almost every way possible. If your card details are used fraudulently, you’ll get your money back, and there’s a good chance that anything you’ll find in a PPI or fraud protection policy will also be found in the terms and conditions of your bank account or credit card.

What’s more, a free credit report could also be next to useless. Every time you apply for credit, your level of risk is measured against the benchmarks of the particular company you’re applying with. There is no such thing as a universal ‘credit score’, but there are things you can do to improve every score you’re given: stay at the same address for as long as possible, get yourself on the electoral register, and keep on top of your bills.

And you can improve your chances of doing that by not wasting money on insurance policies you don’t need. 

 E.ON - Sly as a fox

Monday 1st September, 2008 - £7,977.79 in debt…

When I’ve finally paid off all my debts and I’m looking back at my “journey” (which is what I’d call it if I were an X Factor contestant), I’ll think of month 4 with great fondness. Not only was it the month in which I finally got below the £8k mark - it was the month in which these things happened:

Good times

1) This month’s biggest success story was being accepted for another home-based job, which can fill in the time when I’m not temping or freelancing: I’m going to be an internet researcher for AQA (Any Question Answered). I’ve now finished my training and will be starting the job properly once I’ve finished writing this blog post…

2) I collected a lovely range of loyalty cards: the Nectar Card, Tesco Clubcard, Boots Advantage Card and Co-op Membership Card. Aside from the Co-op one, these all enable me to collect points, which mean prizes. Hooray.

3) I used Money Saving Expert’s new credit scoring tool to find out whether there’s anything I should be doing to make sure my credit rating is as good as it can be by the time my debts are cleared. I learned that I should cancel each card as soon as I’ve paid it off, and that I shouldn’t move house. Fine by me.

4) Online shopping with Asda was an enormous success, but they’ve now stopped sending me ‘free delivery’ vouchers by email. I am shocked and appalled.

5) I’ve decided to go on a cheap holiday, probably in November. You might think this is a bad thing, considering my situation, but I’ve decided to put it in the ‘good times’ pile because it will improve my mental state, making me a happier and more efficient worker when I come back. Yes it will.

6) And I’ve signed up for free UK calls with 1899, a very cheap secondary phone supplier. I keep forgetting to dial the prefix number though - might have to have it tattooed on my hand, which will cost money.

Bad times

1) I went a bit crazy doing too much work. I would have had to stop myself if the work hadn’t dried up on its own.

2) After switching my gas and electricity to a capped tariff with E.ON, I discovered that either (a) the comparison service I used had provided me with the wrong information, or (b) E.ON had done something shifty and added a cancellation fee where there shouldn’t have been one.

3) I realised that Endsleigh have been taking me for a ride for the last 18 months or so, charging me for a Payment Protection Insurance policy I didn’t want. On the plus side, I complained to Endsleigh and they sorted it out straight away. I now have a cheque for £25 to play with.

So, with a grand total of six plus points and only three minuses, this has been one of my more successful months. I’ve also paid off £401.04 after interest - and that doesn’t include this month’s Barclaycard standing order, as my statement hasn’t arrived yet. I’m still perfectly on track for my goal of being debt free by the end of April 2010.

Now, how much quicker could I do this if I become the fastest researcher AQA has ever employed? There’s only one way to find out.

A Cuddly Toy

Tuesday 12th August, 2008 - £8,228.83 in debt…

I know I’m only three months into paying off my debt, but I can’t help thinking about things I’d like to spend my money on. It’s getting increasingly difficult to stop myself from getting more credit and buying a new car, a house, a holiday, maybe a nice 42″ TV… a cuddly toy?

Anyway, I’m not going to do that - I’m going to pay off my debts before I make any major purchases. Yes I am. But what happens if I pay everything off and my credit rating is still inexplicably poor? The credit crunch could make it very difficult for me to grab a mortgage, so I’d best get working on my credit score now.

The Money Saving Expert site has just launched a new credit scoring tool. This will tell you, at no cost, how much of a risk you are to credit companies. It will ask you ten easy questions, and you won’t even have to have any paperwork handy.

Neither borrowers nor credit reference agencies just have a ‘credit rating’ that applies for you across the board. The term is ‘credit score’ and it simply compares you against a mythical ideal borrower. It depends on factors that can be worked on or changed, and there is no such thing as ‘credit blacklisting’. There’s more information on credit scoring in this article.

Using the Money Saving Expert tool is quick and easy, and it allows you to consider how your score could be improved. For instance, it asked me how long I’d been living in my current house for - less than a year, one to three years, or over three years - suggesting that, once I’ve been here another year (it’s currently two years), my score will magically improve.

It also asked me how many credit cards I have, regardless of whether I use them. It emphasised that lenders get nervous about my access to credit - not just the credit I actually use - so I must remember to cancel all my credit cards as I pay them off. That was very useful to know.

Even though I’ve had no CCJs, never been bankrupt, and am on the electoral roll at my current address, a mixture of missed payments and loads of credit have made my credit score, in Martin’s eyes, “weak”. But, if I can make it to my 30th birthday according to the debt-paying-off plan, my credit score will change to “excellent”.

But that won’t happen if I forget to cancel any of my cards (as soon as I’ve paid them off), fall behind in my minimum payments (according to Martin, this could set me back years), or have a weak moment and apply for a loan on that coveted 207CC. Fingers crossed…