DON'T CUT UP ALL YOUR CREDIT CARDS
Equifax warns that drastic action when in serious debt could make life difficult for future finances
As the credit crunch continues to have an impact on consumer indebtedness, leading instant online credit information provider, Equifax, is warning consumers struggling with their finances to make sure they don't cut off all their options. "A natural instinct when getting to the point of facing too much debt, especially on credit cards, is to cut them up" confirmed Neil Munroe, External Affairs Director, Equifax. "But whilst it's important to stop using credit when you're already struggling to manage repayments, we do advise that consumers don't cut up all their cards.
"Obviously it's important to try to get financial matters straight first. But once they have achieved this they may want to use credit in a responsible way to support their finances in the future. If they have had a record of debts and defaults then they will find that new applications may not be accepted. So our advice is stop using credit cards and do everything possible to pay off outstanding balances, but don't cut them all up."
In a recent survey* conducted by Equifax amongst purchasers of its credit reports and ratings, nearly a third of respondents said they were concerned that they may get into financial difficulty in the next 12 months, with 35% saying they already have short terms debts worth more than £10,000. With new credit proving harder to find at the moment as banks and other lenders tighten their lending criteria, Equifax is urging consumers to tackle money worries instead of burying their head in the sand.
"Credit cards are a costly way to pay for essentials if the bill isn't paid off in full at the end of each month" warned Neil Munroe, "but we do acknowledge that having access to credit could be useful in the future and that's why we are advising that consumers don't cut up all their cards.
"It's also crucial not to forget any cards on which there are outstanding balances - any overdue payments will be shown on an individual's credit file and will be taken into account by lenders when new applications are made. It's worth consumers getting a copy of their latest credit report to make sure no cards are forgotten."
The Equifax Credit Report can be purchased online instantly for just £11.95 by visiting www.equifax.co.uk.
Equifax Tips and Advice to Manage Your Debt
Many consumers live on a month by month basis, so here is a reminder of key financial costs throughout the year;
- Mortgage or rent - a 'must pay' item
- Utility bills - don't forget winter bills are likely to be higher than in the summer
- Council tax
- Water rates usually come quarterly
- Summer holidays are always a big expense
- Christmas, birthdays and other special events
- Be A Savvy Saver - There is no gain in attempting to save if interest is building up on outstanding debts. Paying these off first is essential
- Be A Debt Buster - Assess all the money owed and start paying back in order of priority, starting off with secured loans on homes and high interest loans and credit cards
- Don't Live in the Dark - Obtain a copy of your credit file to keep track of credit agreements and repayments. This can be obtained instantly online from www.equifax.co.uk
- Be Direct - Direct debits are a great way of managing money effectively, paying off debts and ensuring bills don't go unpaid
- Emergency - Try to save something every month using a standing order. This will provide you with a valuable backstop for those unexpected bills
Source: Equifax Plc. www.equifax.co.uk