You work hard, you pay your bills, perhaps you drive an old car. You don't have much of a taste for designer labels and you're certainly not extravagant. So how come you owe so much money?
The answer is likely to be stealth debt and you aren't alone. With the Institute of Fiscal Studies announcing that families are currently experiencing the biggest fall in living standards in 30 years, more and more people are finding themselves slipping into the financial shadowlands of soaring credit card bills and bottomless overdrafts often without even noticing.
Here are some tips on how you might be able to turn your back on stealth debt:
First things first you need to know the size of the problem, so get out your bank and card statements and really look at where your money is going. Then go through your credit report. Lenders use it to assess whether you are a reliable borrower, so it needs to be accurate and up to date.. You can see your credit report and Experian Credit Score for free with a 30-day trial of CreditExpert (New customers only. Monthly fee applies after trial ends).
Try to set a budget
Jot down your monthly income and note every penny you spend, from your lunchtime sandwich to the electricity bill. You'll soon know how much you need to cut back. The most efficient way to track your spending across all your accounts is with online budget planner software like Money Dashboard, where the application will automatically tag your credits and debits into appropriate categories. If you're a true stealth-debter, it's not going to be the must-have handbag or smartphone that hurts your bank balance, but those regular little indulgences. Too many glossy magazines, take-away lattes and supermarket impulse buys may eventually take their toll, so always ask yourself whether you really need something.
Price comparison sites like Lower My Bills could offer a painless way to save on regular outgoings, from gas and electricity to home contents and car insurance. You might even be able to switch existing borrowing onto cheaper deals.
Work on your financial CV
When you apply for credit, lenders want to know that you're a responsible borrower and can comfortably afford your repayments, so they look at your credit report to see what you owe and whether you make your payments on time and in full. That makes it crucial to ensure that your report is up to date and accurately reflects your circumstances. Schedule in a check every month and challenge any errors or unfamiliar entries. Even a minor inconsistency could bring down your credit score and cost you the deal you want. If you have debts, begin paying them off, starting with the ones charging the highest interest. It's also best to register to vote at your current address, as lenders use the electoral roll to make sure you live where you say you do.
Skipping a payment is not a saving
If you're thinking of missing a repayment, don't as you could lose a good deal and incur charges. Missed or late repayments stay on your credit report for at least three years, warning lenders that you can be unreliable. Instead, talk to the relevant lender, who may be able to reschedule your debt so it's more affordable. If past problems have a reasonable explanation for example, you missed a repayment because of an accident add a note to your credit report. Repaying the full balance each month will help you avoid interest charges, and at least the minimum payment would help you to protect your credit history.
Think before you apply
Every time you apply for credit, it triggers a search of your credit report that leaves a trace, known as a footprint. Lots of them could lead lenders to think you're desperate or even to suspect a fraud.
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