I’ve often wondered if my credit file and my health are linked. Recently, I tried to get a secured loan and discovered, like my health, it was impeccable, but six and a half years ago it was a different story. But I’ve learned a lot about rebuilding my credit and ensuring that I can get better deals for the credit I need now.
It all Started With Cancer
It sounds funny to say, but I was made redundant around the same time as I discovered I had cancer. We were living on a stretched budget – both adults working overtime to ensure all of the bills were paid and making sure we covered all of our responsibilities. This is something that we did, but then I started feeling ill.
At the same time, my company started looking for people that wanted voluntary redundancy and after talking it through with my husband, I took it. Looking back now, that was the beginning of the end for my almost perfect credit file, and over the next few months, dealing with cancer and treatment and everything else, somehow we started losing track of everything.
Although it was perfectly understandable, I wish I’d used some of the redundancy settlement to pay off my credit cards.
Fast Forward a Few Years
The good news was, a few years later, the cancer was in remission. The bad news? We’d picked up three defaults each on our files as we struggled to meet our credit card bills and although we paid them off (with a little help from our friends and family), those marks remained.
So, very carefully, after those few years, I got a small secured loan (because we’d never foreclosed on the mortgage), and paid it off diligently. Then I got a small credit card and put a few things on it which I then paid off as soon as the bill was generated. I also started keeping a mobile phone contract – which, although it seems silly, did wonder for my credit rating. Then I simply kept at it, as did my husband. We diligently paid our bills and never ever put ourselves in a position where we were living beyond our means.
We even managed to build up some savings. I learned my lesson – I designed my budget around what I was earning, not around what I wanted. And while cancer remains in remission, my credit file was really getting better too.
So What about the Current Situation?
It’s true that defaults age off your file six years after the ‘closure’ of the account. So, suddenly, my credit file became so much better. My husband is about to improve and his final default will age off in a few months and we’re going to consolidate our debt whilst ensuring that we’re paying the best rate on our mortgage too – it’s quite liberating to be in control of our money again.
Although there’s a recession and we’re not seeing much of a return on our savings, I’m delighted that my credit file and my health are both close to perfect right now.
But the three key concepts to why I made it and have fixed my credit file are:
- Talk to your creditors before things get out of control – if you do, they might be able to help you.
- Pay off your defaults by arrangement – don’t ignore them. CCJ’s and other nasty surprises await people that ignore defaults, and those are even worse on your file and may mean you can’t get any credit at all.
- Build up your credit bit by bit. Use the surplus in your budget towards credit card bills and ensure you don’t leave them maxed out. Get a mobile phone contract and accept cards with higher APR – you can always negotiate them down once you’ve proven that you’re not as big a risk as your file suggests.
Once you’ve done all of these things, and wait till the issues on your file expire, you’ll be able to get better deals on your credit. Creditors can’t see what deals you currently have, so shouldn’t offer you poor rates, just because you’ve got a high APR credit card, but if that worries you, just close it once it’s paid off. It’s less debt to carry and gives you more ‘room’ anyway.