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I hear this a bit from people, and they seem to be more worried about their credit report and credit score, than they are in the moment; the moment of what to do?
It is important that we pay our bills and maintain a good credit rating, but really only if you can afford to do so, and are going to be credit active in the future.
Not everyone is credit active for a variety of reasons.
As to why some people struggle with their monthly bills, once again a variety of reasons:
They may have lost their job for whatever reason, possibly redundancy, or their employer has gone out of business.
There may be health issues that have caused a person to not be able to work, and this has caused a massive reduction in income. Even if receiving benefits, many cannot live on benefits alone.
Being overextended, just owing too much money against what a person may earn.
(insert reason here) There are many ways a person may find themselves struggling with their bills and debts.
And for many people, they will continue to struggle paying their credit cards, car loans, personal loans, at whatever means necessary. They will juggle who to pay and when to pay them, borrow from one credit card to pay another, use consolidation loans to try and rally the debt together. For some people it takes time to not give up, but realise, they need to get a plan in place. A get out of debt plan, or a plan of some kind to resolve the struggling each month.
And they are always concerned about what affects their credit score.
There are warning signs to look out for, but as I have said over the many years I have been helping people, no one knows your finances better than you, and you know if you are insolvent.
So where to begin?
Do an Income and Expenditure Sheet
Sit down with all your monthly bills and debts, and do an income and expense sheet, put pen to paper. Look and see exactly how bad, if bad at all the issue may be. Along with that, track your spending for a few months. Again, track every penny you spend, either pen to paper, or finger to mobile app.
There may be areas you can make adjustments or changes in your spending to save money to pay your bills and debts.
Going out every Friday with “the crew” for drinks can add up. So can those mocha – latte – fancy coffees each day.
Once you see where you can make some adjustments, you may not be struggling any longer.
Of course the opposite can be said as well, you are negative each month, not enough income to cover your expenses.
Then what?
Stay Current on Priority Bills
You need to concentrate on your priority bills to insure they stay current:
Rent or mortgage
Utilities, gas and electric, and water rates. This can include your Internet as well, as most of us require access. Having the big TV package deal to watch all the matches and films, is NOT a priority.
Food, obviously.
Insurances
Council tax
Child maintenance
Any CCJ’s you may have.
TV Licence
Phones, even mobile phones are a priority.
After these bills are paid each month, you then look at other bills and debts:
Secured loans, such as a car loan would be next after the other bills are paid.
Credit cards or other unsecured debt, such as catalogues, or unsecured personal loans.
Overdrafts, but you need to be careful with these if you owe money and as soon as your wages go in, the overdraft gets paid.
Stay current on the priority bills, and then see what you have left as a surplus each month to pay towards the other bills and debts.
If you have nothing, or very little left over as a surplus income, or you are negative, this is where you need to look at other debt options, such as a Token Payment Plan, Debt Management Plan, or possibly some form of insolvency.
It is…What it is
If you are struggling with your bills and debts, you need to try and live in the here and now. If you cannot afford to repay your debts after insuring your priority bills are current, yes it is going to impact your credit and credit score.
Anything outside of the agreed payments on the agreement or contract can affect your credit score.
But what is more important at the moment?
Being unburdened by the stress of it all is one good outcome.
You can improve your credit score at a later date, when your financial situation improves. In addition, there are bad credit loans that may be useful in increasing your credit score.
Sometimes people carry the weight of their bills and debts on for years, before one day making the decision to just try and get on with their lives, without the headaches and stress associated with struggling and juggling to pay bills.