Credit card debt
Unexpected redundancy
Customers refuse to pay
Credit rating problems
Student debt



Credit Card Debt

I have always worked full time and had a credit card for years. The repayments were never a problem and I cleared the balance each month.

However, the more I spent and repaid on my card, the more offers of credit cards came through the post. Foolishly, I applied for another card and this was the start of my debt problems.

I soon became able to make only the minimum payments on my cards. This resulted in me applying for more cards just to survive, as all my surplus income, and more, was being used to make payments on my existing cards.All too easily, the debt mounted up. Within two years, I had numerous credits cards and had run up debts of over £30,000. I was paying more than £1,000 per month.

After a visit to Adcrofts, I entered in an Arrangement with my creditors that brought my monthly repayments down to £300 per month. Without Adcrofts help, I almost certainly would have been made bankrupt.

Unexpected Redundancy

When my husband was made redundant three months ago, it seemed that our only option as to make ourselves bankrupt. At the time we had a loan and several credit cards.

Although he quickly found another job, his salary was much less than before. The drop in income meant that we were paying our more each month than we had coming in. After many sleepless nights, believing that we were going to lose our home, we sought advice from Adcrofts.

They advised us that backruptcy was not our only option and suggested an alternative. We are now repaying our debts at an affordable level through an Individual Voluntary Arrangement.

Customers refuse to pay

I have a customer that has not paid me for work I carried out for them some months ago. I intend to take this person to court so that I can demand payment and wondered if you could tell me what procedures I need to take before I put in my claim?

A

Last month I dealt with the first steps of what to do in this case including the importance of sending a final demand letter stating the full amount due and the expected pay date. There are a few other considerations to take into account when writing the letter and before you take things to court.

The letter must make it clear who is responsible for paying the outstanding invoice. You need to check the customer’s details accurately to see if they are a Limited Company, partnership or sole trader. Any Court documents must state the correct name of the customer. For example if your customer is a sole trader, your claim will be against “Fred Bloggs trading as FB Supplies.” You should be able to find the relevant information on the customer’s letter headed paper. If you get this even slightly wrong, you will have your claim rejected.

Once the final demand has been issued, you may find that further action is not necessary, as it is at this point that the majority of customers will pay before court action. If you need to go to court, you can find further information on the Court Service’s website: www.courtservice.gov.uk/mcol

Failing to obtain prompt payment from customers is one of the reasons that businesses fold. Not only does late payment affect cash flow, it could lose you a customer if you are forced to take them to court. You should set up a system for obtaining payments that you follow for every customer. For further guidance, visit the Better Payment Practice Group Website at www.payontime.co.uk

Credit rating problems

Recently I applied to have my credit limit increased in order to make some essential purchases. Even though I know I will able to pay the bill straight away I have been refused. I decided to check with a credit agency to see if I could find out what the problem could be and they have said that it could be a link to a person in my credit file. What does this mean and is there anything I can do about it?

A

There are plenty of things that could be damaging your credit rating and it is surprising how often it is something you would not think of. In this case it is possible that your credit file has you linked, in some way, to another person who has a very poor credit history. Simply having an association with this person will reflect badly on your own credit rating.

The link between you and the other person could be anything from a business partnership, family connection or even your spouse. Unfortunately, if you are connected with this person there is very little you can do until their credit rating improves.

However, if you are no longer connected to that person, for example if you are no longer in business with them, or if you are divorced, you can ask for your file to be disassociated from theirs. To do this all you need to do is to write to a credit company such as Equifax or Experian and explain your previous connection to the person and the reason for this link being broken. They will then notify you, and other credit companies, of your disassociation and your credit rating should improve.

The addresses to write to are;
Credit File Advice Centre, Equifax, PO Box 1140, Bradford, BD1 5US or Consumer Help Service, Experian Ltd, PO Box 8000, Nottingham NG1 5GX.

These organisations also have helpful web sites at www.equifax.com and www.experian.co.uk. Basic credit reports cost £2 and there is no cost for filing a notice of disassociation or other information to correct errors on your file.

Student Debt

My son is about to go off to university. I have read lots of articles about the debt problems facing students. I am worried how my son will cope, and that he will build up huge debts that he cannot pay back. I am thinking of letting him have a credit card on of my accounts, so that he has something for emergencies.

A

There are a couple of separate issues here. First, your son needs to set himself a budget for living expenses, etc when he is at college. It is tempting to think you have a lot of money to spend if you are given an overdraft limit of, say, £1,000. Many students make the mistake of splashing out on new clothes and going out every night of the week when you first go away to college, blowing a hole in their finances in the first few weeks.

The overdraft and any student loan will have to see him through the year, so he needs to sit down and work out how much he can afford to spend each week. When he knows what his weekly budget is, he should deduct the costs he must pay, such as rent, travel, utility bills, basic food etc. This may leave him with an amount for extras and luxuries like clothes and nights out! The trick is to try to limit the spending on fun to a reasonable level, so that he is not paying for this for the next ten years.

Secondly, there is the question of giving him a credit card on one of your accounts. I understand the temptation to want to provide a safety net, but he has to learn to budget at some point. If you do not expect him to live within his means now, when is he going to learn to do this? In addition, you run the risk of being landed with a big debt, which could mean you do not have the funds to help if there is a real emergency. Remember that it could help your son in practical ways, like helping him set a budget and checking he has a good deal on his bank account.