Dealing with bad credit because of debt

  By admin | October 8, 2011 - 1:02 pm | Bank Accounts, Debt Advice Leave a comment

Many people have debts that don’t affect their credit rating badly, because they are able to make regular repayments. In fact, borrowing can actually allow people to build up a credit history in the first place. It shows potential borrowers that they can handle taking on – and repaying – debt.

However, if you have debts and have missed repayments, defaulted on a loan, received a CCJ, changed your original debt repayment agreement, become insolvent, or faced legal proceedings because of debt – you could have a credit rating that’s been quite seriously affected, depending on the exact circumstances.

With a bad credit history, it can be difficult to borrow money, or even to open a bank account.

Dealing with debt and bad credit

You could still open a basic bank account with a bad credit history as your credit history needn’t be a barrier. Also, there is no overdraft with these accounts, so you won’t be borrowing more money through them, which can help you to get back in control of your finances if you’re used to borrowing beyond your means.

Also, a basic bank account will allow you to make Direct Debit (and perhaps standing order) payments. Your debt repayments and other bills would leave your bank account automatically every month, which can making budgeting simpler.

Working out a budget
You can begin budgeting by working out your monthly expenditure – what you earn/receive minus the essential costs, bills and unsecured debt repayments (credit cards, store cards, personal loans, utilities, etc). Whatever is left over is what you have to live on. To help you stay within your budget, you could begin reducing your spending and/or cutting back on luxuries.

If your unsecured debt repayments plus your essential bills add up to more than your income – there may be ways to reduce your unsecured debt repayments. A Debt Management Plan, an insolvency solution, or another debt solution might be suitable.

Dealing with bad credit
If you’ve reduced your debt payments (from your original agreement), or missed payments, this can be reflected in your credit rating. However, you can improve your credit rating over the long term by making consistent and regular payments.

If you have a bad credit score, it’s likely you won’t be able to borrow money at a good rate, or even borrow any money at all. One option is to avoid potentially expensive borrowing for some time, and focus on making debt payments to reduce your debts and improve your credit score.

If you did apply for more credit, you could be creating problems for the future – as well as potentially damaging your credit rating if you get turned down for credit a number of times in a short period.

Lenders tend to be more likely to approve applications if you live at the same address for a number of years and if you stay in the same employment and don’t ‘job-hop.’ Equifax, Experian and Callcredit are three credit reference agencies that could provide you with further information

Freelancer’s Help Book: Managing Your Finances

  By admin | October 4, 2011 - 2:20 pm | Financial Issues Leave a comment

Many people dream of working for themselves and being their own boss. Going freelance can be a double-edged sword, as independent contractors find themselves landed with the responsibility of dealing with their business finances for themselves.

For freelancers the key to financial management is organization, as losing track of bookkeeping information can have dire results both in the short and the long term. Short term, a failure to invoice or chase payment can result in an unsatisfactory cash flow situation. Long term, mismanagement can lead to trouble when tax return time rolls around.

So what can freelancers do to make their financial affairs run smoothly? Following a few tips and making some sensible choices can help ensure that earnings are received, noted and declared in a pain free fashion.

Money Management Tips for Freelancers

While every worker and every business will have slightly different financial demands, there are some things that can be universally helpful to those who work as a freelancer in their field. Things to consider when managing your money as a freelancer include:

  • Keep business and personal finances separate. Open a new account for business transactions and use it for incomings and outgoings related to your work. While this is not compulsory for freelancers, it can help reduce the possibility for confusion between business and personal funds when the time comes to total up the taxes.
  • Keep a financial diary. Good business people will have a diary of appointments or jobs where they will be in attendance. Creating a separate diary for finances can help to keep things on track. Note the dates of invoices in here and the dates that payments become due, as this will allow you to chase payment if necessary. Also, note the dates on which payments are received, be it in cash, check or by bank transfer. This will allow you to ensure that business and bank records match up and tally.
  • Ensure that you keep and file all business related receipts, so that expenses can be properly calculated at the end of the year.

Getting Help with Your Freelance Money Management

While many people are skilled in the field in which they choose to work, few freelancers are experts in accounting. Nobody needs financial mix-ups adding to the pressure of their work, so seeking help with money matters from a professional can be a great idea. Options open to freelance workers include:

  • Employing an accountant. Using an accountant to keep your books and complete tax returns at the end of the year is a great way to take the pressure off. An accountant will also be able to give up to date advice on money management that is relevant to the way in which you work.
  • Using a Freelancer Payroll Solution is also an option, allowing those who prefer to work for themselves to enjoy the security of a PAYE position without the hassles of handling their own finances.

A Guide to Finding Cheaper Car Insurance

  By admin | August 20, 2011 - 7:55 pm | Insurance Leave a comment

Finding a good deal on your car insurance can be a stressful task – you can look through hundreds of car insurance quotes, weigh up their pros and cons, and still feel like you’re getting nowhere. You can make the whole arduous task a whole lot easier on yourself by being clued up on what to expect and by being armed with tricks you can employ to bring down your quote.

Firstly, don’t stay with your current insurer unless they are offering the best deal. Many drivers simply renew their cover without considering whether or not they might be overpaying. Shop around and find out who can offer you the best deal before deciding whether or not to leave your current insurer.

Remember that one insurer may seem to be the cheapest, or the best deal, but unless you are comparing exact like for like cover you are unlikely to get a true picture of what’s being offered. Have a clear idea of the product you will be chasing before you start consider quotes.

Don’t be afraid to increase your voluntary excess – by agreeing to pay more towards the cost of repairs on your vehicle you can stand to bring your premiums down significantly and if you are not at fault in the accident any voluntary excess can be recovered.

You should only be naming regular drivers of the car on your policy – insuring a vehicle to allow it to be driven by any driver can push up premiums. Avoid adding young drivers to your policy if possible as the risk a young driver presents to insurance companies usually mitigates any saving you might be making from naming individual drivers.

Take security seriously and fit whatever devices you can to deter thieves – by fitting an approved alarm, immobiliser or vehicle tracking device you could see premiums drop by about ten per cent as you will seem to pose less of a risk to the insurers. This can also save you a lot of grief as it will put thieves off taking your beloved car and your belongings in it!

Advantages of an IVA over bankruptcy

  By admin | June 25, 2011 - 11:21 am | Debt Management, IVA, Uncategorized Leave a comment

Putting it simply, an IVA is considerably better than declaring bankruptcy. In short, these are the main reasons why this is so.

Firstly, there is no social stigma associated with an IVA. Of course if everyone knew there would be, but unlike bankruptcy (which is advertised) you are allowed to keep in the shadows with the IVA.

Secondly, an IVA does not affect your ability to trade. With a bankruptcy on your record, borrowing becomes tough, whilst with an IVA is easier to borrow.

Thirdly, the fees associated with an IVA are considerably less for the creditor and the borrower than the fees for bankruptcy. This is a large positive considering the financial implications.

Fourthly, with an IVA the individual in debt can keep their assets and save them from forfeiture. Unlike bankruptcy there is open access to the individuals home, and assets. This proves to be the defining reason as to why an IVA is considerably more favourable compared to bankruptcy.

Calculating the costs of the little things

  By admin | January 26, 2011 - 11:14 am | Budgeting 1 Comment

It can get a little hectic when trying to calculating monthly expenditure for your day to day living costs. However,  this is a great way to make big inroads into practicing money management and learning more about your biggest spending leaks.

Try out this ‘cost calculator‘ from insurance comparison site confused.com. Its’ a nifty widget that helps to total your monthly expenditure. After inputting a few of my figures i found some surprising leaks in my monthly expenditure. Simply enter your expense details and see how much you could be wasting each month:

Cost Calculator Widget created by Confused.com

One of my biggest leaks was buying lunches at work, it seems like a simple obvious expense, but i didnt realise how much i was wasting:

Cost calculator showing my expenses per month

I am spending upwards of 60£ per month on lunches at work, and i think that this figure could be even higher when i factor in pub lunches and such. I think i could probably save £30-40 a month off my monthly expenditure by preparing my own lunches.

Eating out was also a reasonably large expense at £40 per month. While i am not likely to stop socialising and having meals out, perhaps i could cut back this figure slightly to perhaps £20 per month.

One action you could take from this widget is to jot down your biggest expenses and find out ways in which to reduce this monthly figure. Think of all those savings that are out for the taking… Feel free to post comments below on your biggest expenses or any shock surprises!

IVA or bankruptcy?

  By admin | December 28, 2010 - 11:15 am | Bankruptcy, Debt Advice, IVA Leave a comment

If you are having trouble meeting your debt repayments you should always seriously consider an IVA (Individual Voluntary Arrangement) before you consider Bankruptcy. IVAs are by far the lesser of two evils.

With an IVA an Insolvency Practitioner will negotiate with your creditors a realistic repayment plan. They will be fair to both parties on this and not negotiate a repayment you can’t afford. They may also negotiate a reduction in the total amount of the debt you repay.

However, if you are made, or make your self bankrupt then you will still have to pay your creditors a certain amount. This will be decided by the Official Receiver, who is the person that will oversee your bankruptcy. The Official Receiver will go through your personal accounts, look at what money you have coming in and what you have going out in the way of necessary expenses, and any left over will be used to pay off your debts.

In addition to this, you will certainly lose your house if you own it or it is currently mortgaged. If there is equity in your house, that is it can be sold for more than you owe on your mortgage, it will be sold. Your mortgage will be paid off and the surplus will be used to pay off your debts. If there is no equity in your house the mortgage company will repossess it, as bankruptcy is a legal declaration of you not being able to pay your debts.

Other luxury items you own may also be sold to pay your debts. The Official Receiver won’t take your bed or cooker, but if you have an expensive item, such as a large plasma screen TV, they make take it and sell it. They may also take your car too, even if you need the car to get to work they may decide that it is too expensive and you could get to work with a cheaper one. In this case your car will be sold and you will have to buy a cheaper one and the difference will go towards paying your debts.

So you should always consider an IVA first, but in either case you should always seek professional advice before taking either course of action.

Tricks to Break the Credit Card Habit

  By admin | September 20, 2010 - 1:02 pm | Credit Cards 1 Comment

If you are someone who is in the habit of using credit card for every other purchase, then by most chances you are also a victim of huge debts. More than half of the Americans are today submerged in huge credit card debt. Extravagant lifestyle, emergency medical expenses and even job loss are some of the significant factors that lead to debt problems. If you really think you can’t do without your credit card, then you should consider keeping the following points in mind.

credit card cycle

i.        Track your expenditure: Spending more than what you earn has become possible with the use of credit cards. The feeling that you are not using your actual money to make purchases somehow tempts you to spend beyond your affordability. Make a list of whatever you buy for a month, even for the smallest of purchases. At the end of the month, you will be surprised at the amount that you arrive at. This depressing detail about your spending will help you to become wise with your spending.

ii.        Fight marketing gimmicks: You need to realize the fact that advertising and marketing of brands are just meant to empty your pockets. These marketing forces tempt you to believe that you cannot do without a particular product. Do not let these manipulate your behavior. Ask yourself, were you not living comfortably enough before? Do you really require the new products? Such rationalization would help you to fight these marketing efforts.

iii.        Break the habit: You must consciously try to change your habit of relying on your credit card. Realize that credit card is just a tool; it becomes a problem when it is used unwisely. The problem of overspending can be put to rest once you determine to stop using it.

iv.        Consolidate your balances: Transfer your balance from the high interest to the low interest card and ask the credit card company for a transfer fee waiver. If your request for the waiver is turned down, consider using a different card to consolidate your balance.

v.        Go cash-only: Commit yourself to using cash to make your purchases. This way you can ensure of keeping yourself away from falling into debt. The formula is simple; if you can’t purchase with what is there in your wallet, you better do not buy it at all.

vi.        Destroy your cards: Call up your credit card company and ask them to cancel all the cards not containing balances. Do not worry about your credit score taking the blow, overspending is a larger problem and you need to get rid of it. You can keep your oldest card with you if you are thinking of applying for a mortgage in the near future.

vii.        Keep your remaining card for emergency use: You have probably heard about people who put their credit card into a cup of water in the freezer. They do this so that it becomes difficult for them to reach out for their credit cards frequently. The point is clear; you must use your credit card just for extreme emergencies. And for all other purchases, cash is your king!

viii.        Create an emergency fund: Unexpected use of cash can arrive anytime and it is wise to be prepared for it. Resolving to use credit cards in these situations can just compound your problems. Keep aside a part of your income every month to fill up your emergency fund. This can bail you out of a major financial crisis.

ix.        Clear your balances: To repay your debt in full you need to pay more than the minimum every month. Every month when you contribute to your emergency fund and pay for your monthly necessities, do remember to keep aside a few bucks to consolidate your credit card balance.

x.        Measure your progress: Being careful enough to consider all the steps mentioned above, you should see your expenses decreasing each month and your credit card balances increasing. This can be a great motivation to continue and will recommit you to control your expenditure.

 

Author-bio: This guest post is written by Jack Reed of darngoodblogging.com. His write-ups on various financial topics have helped many people to get wise with their money.

Simple ways to improve your credit score

  By admin | September 17, 2010 - 1:06 pm | Credit Cards Leave a comment

So, you’ve had a recent series of events that were less than optimal. Maybe you lost your job, perhaps had an unexpected medical bill, or maybe you were feeling down one day and decided to impulse buy things you really can’t afford? Sound familiar? Well all the above can lead to you missing payments on your credit card statement or household bill as we let things run away from us.

So what, I hear you ask? It’s just one payment or two, I’ll catch up. It’s not the end of the world right? Actually every time you default on a payment your credit score decreases, and this can have an effect on whether you get accepted for that low APR credit card, that brilliant loan or even if you get a good deal on your mortgage!

However just as your credit score declines after a series of events, it can also increase through a series of counteracting events. The trick is knowing what will boost your credit back up to where it was (or maybe even higher).

First, make sure you aren’t in over your head. Does your income exceed your expenses? If it doesn’t, you may need to negotiate with some of your creditors in order to get yourself out of the hole you’ve found yourself in. If you have to make only the minimum payment on all of your bills at first, that’s fine, although bear in mind that this is not going to get you out of your debt for a very long time! Make sure that as you are able, you increase the amounts paid to different creditors in order to pay those bills down faster.

Apply for a 0% balance transfer credit card and get all your debt in one easily manageable place.

Get a copy of your credit file (at least once each year) and make sure that everything in it is up to date and accurate. You could have things in your credit file that aren’t even yours that are affecting your credit score, if this is the case, correct the problem as soon as possible and improve your credit score instantly. In most cases, you can submit a statement to be put into your credit file that explains any particular circumstances that got you into the problem in the first place.

Another way of increasing your credit rating is to apply for store-based credit cards. These types of cards are typically easier to get, yet they help build your credit just like the major credit cards do. In some cases, getting a co-signer might help in your quest for credit. Ask a good friend or a family member who has good credit if they would be willing to do this for you. This can be a big help in re-establishing your credit.

Also, if you find you keep getting turned down for new credit, wait a while before applying for more. Everytime you apply for credit, regardless of whether you get accepted or not, it will affect your credit score.

Rebuilding your credit doesn’t happen overnight; you do have to have some patience and work at it diligently for it to happen. But the rewards can be wonderful. Invest in yourself, you deserve it!

Starting Out as a Self Employed Freelancer

  By admin | September 8, 2010 - 2:46 pm | Money Leave a comment

The decision to become a self-employed freelancer can be a rewarding choice that allows an individual to work autonomously under their own terms. Of course, it can also be an organisational and taxation nightmare for the unprepared. Self-employment status affords privileges but also responsibilities, and may or may not be the correct choice for a person depending on services rendered, business goals and existing and future clients and contracts.


Forming a Business Entity

Self-employed individuals can choose to trade in different forms. They can trade either as sole traders, partnerships, limited companies, or as co-operatives. As sole traders, freelancers operate individually, while partnerships involve two or more freelancers running the business.

Self-employed persons who operate limited companies form separate business entities distinct from their owners. In co-operative organizations, businesses are owned by the people who organize it.


The HMRC Determines Self-Employment Status

The H.M Revenue and Customs classifies working individuals in three ways:

Employees: Employees are provided work and labour tools by the employer. They contribute regular working hours, either through a PAYE umbrella company or regular company. Employees receive benefits, overtime and vacation.

Workers: Workers are temporary, short-term casual workers, or agency staff who work irregularly or seasonally.

Self-Employed: Self-employed individuals retain complete autonomy over how and when they work and can also hire substitutes to replace them when necessary. Self-employed individuals contribute to class 2 NIC (National Insurance Contributions) on their own.

IR35 and the HMRC Status

For taxation purposes, the HMRC is empowered to define self-employment status. The H.M. Revenue’s employment classification affects not only taxation issues for freelancers, but worker’s rights as well. The HMRC may determine, after reviewing individual business contracts, that there is mutuality of obligation between the client and provider, that there is no autonomy retained by the contractor or that there is no right to substitute work. The HMRC may then fail to grant self-employment status to a person or entity.

Failing the self-employment test according to the HMRC could make a self-employed freelancer liable to pay schedule E IR35 taxes. IR35 addresses ‘disguised employment,’ and taxes freelancers (and/or their limited companies), who have cited their employment status as self-employed, but were technically employed, thus avoiding tax.


Avoiding IR35 Using PAYE Umbrella Companies and Limited Companies

One obvious way for freelancers to avoid being caught in the IR35 hole is to have contracts reviewed by tax specialists. Another way of solving the ambiguous employment status is to either register services with a PAYE umbrella company or form a limited company.

A PAYE (pay as you earn) umbrella company pays a salary minus national insurance contributions, and makes paperwork infinitely easier. Professional insurances and expense invoices make providing short term services relatively simple using PAYE umbrella companies.

Forming a limited company is a decidedly more complicated endeavour. Those freelancing long term and operating under contracts that already fall outside of IR35 may benefit from setting up a limited company. This is also the most tax efficient method, but also requires day to day administration and the meeting of several legal requirements.

A tax specialist can help determine the appropriate business entity for aspiring freelancers.

IVA more flexible than bankruptcy?

  By admin | August 12, 2010 - 4:34 pm | Bankruptcy, IVA Leave a comment

So why is an IVA more flexible than bankruptcy? Well I guess it all depends on your individual circumstances, the amount of money owed, your income and your lifestyle. There are many positives to both an IVA and bankruptcy of course dependant on what suits your individual needs.

The flexibility with an IVA is that you do have to make payments to your creditors but only what you can afford to pay and normally over a fixed term this does require court proceedings but normally you do not have to be present and neither do your creditors if they don’t want to be. You also might not have to loose your home or your possessions and normally is a private arrangement.

Bankruptcy is a lot more serious than an IVA but you are also protected that they cannot take away everything you own to pay off your debts normally a bankruptcy order is a lot more public it will mean you having to go to court and sometimes it is even in certain sections in the newspapers.

I believe now that thanks to new laws in this country that an IVA is so much more flexible and for lots of people an easier and safer option as t offers such great flexibility.

But in saying that I do believe that it does depend on your circumstances and only you can decide what is best and most flexible to suit your individual needs.