Your pre-Christmas credit work-out

Your pre-Christmas credit work-out

You spend months planning the Christmas festivities: where to go, which parties to attend, what to wear, which presents you’ll give. Quite how you’ll pay for all of this often gets overlooked in the excitement. As a money saving expert it is important that I highlight how to look after your money and your credit record .

It’s tempting to think that you can always turn to your trusty credit card, bump up a personal loan or take on a new credit deal and worry about working off the seasonal excess in the New Year. In the current economic climate, that may not be possible, as lenders worried by the recession and the rising tide of unemployment limit the number of applications they accept to people with the best credit histories and consider downgrading spending limits or raising interest payments for people who can’t show that they’re trustworthy borrowers.

So this year, it’s time to treat your finances to a pre-Christmas credit work-out. There’s a lot you can achieve in a couple of months - and you’ll enter 2010 in good shape.

Induction

• You need to know how fit your finances really are before you can decide where to concentrate your efforts, so dig out your bills, card and bank statements and go through them carefully. Try to identify unnecessary spending that can be eliminated to create a surplus for Christmas projects.
• Take a look at your credit report - the personal history of your cards, loans, mortgage and other credit accounts, your repayment record and other information lenders see when they decide whether to make you an offer and what terms, such as interest rates and spending limits, to set. It will give you a snapshot of what you owe, how well you are managing - and whether you can justify borrowing any more. You can see your Experian credit report for free with a 30-day trial of CreditExpert.
• Set yourself a pre-Christmas budget. Note down your rent or mortgage, Council Tax, interest and repayments on any loans or cards, utility bills and essential food, drink and running costs. Then add a margin for entertainment and personal treats. What’s left can be saved towards Christmas extras.
• Plan your Christmas spending well in advance, set limits for presents, parties, for decorations and anything else you can think of - and stick to them. If you think you’ll need to borrow to make this a happy Christmas, work out whether you’ll be able to afford the repayments over time. If the answer is no, cut back. Diamond earrings, the latest Wii and a case of Champagne aren’t necessary - they’re an aspiration. Your friends and family will be just as pleased with a less expensive alternative.

Initial programme

• Go through your credit report carefully to ensure that it’s up to date and accurately reflects your circumstances. A single clerical error could damage your chances of keeping the credit limits you have or of opening any new accounts, so if you find something you disagree with you should contact the relevant lender and ask for it to be amended.
• Don’t skip repayments to liberate money for Christmas. A missed repayment stays on your credit report for at least three years, warning lenders that you may not be reliable. You could pay a steep price later, in the shape of higher interest rates or being turned down for credit you really need.
• If you’re thinking about getting interest-free credit for furniture, white goods or electronics ready for family celebrations, don’t apply for several deals within a few weeks or months. Every application leaves a record on your credit report and if lenders see lots of them in a comparatively short period, combined with other information this can suggest that you’re desperate for money or even that fraud is being attempted. Stick to the essentials for now and console yourself with the thought that things will be cheaper in the New Year sales anyway.
• Find the section on financial associations in your credit report. It lists anyone with whom you share a financial connection, such as a mortgage. When you apply for a credit card,  loan a mortgage through a finance lender they may also look at the credit reports of anyone financially linked to you, because their situation could affect your ability to honour the deal. If you’ve split up with a former partner - business or personal - you should always reallocate any debt and close the account(s), then ask the credit reference agencies break the link between your credit reports, or you could suffer if they get into financial trouble in the future.

Advanced programme

• Now you’re ready to work on improving your credit status. One easy exercise is registering to vote at your current address. Lenders use the electoral roll as a precaution against fraud, to check that you live where you say you do. If they don’t find you, you could be asked for additional proof of identity or even get turned down.
• Look out for old or unused accounts that you can live without. Lenders take into consideration the credit you’ve already been granted whether or not you’re using it, so it could be time to say good-bye to that just-in-case store card.
• Ask to add a note of explanation to your credit report if unforeseeable events, such as an illness, explain past problems with making repayments. Lenders will see this and may take it into account in the future. You could also set up direct debits that will prevent you from missing repayments in the future.
• Give yourself a Christmas present by discovering how your new regime has improved your credit status. During a trial of CreditExpert, you can order your Experian Credit Score for only £5.95. It won’t be the same as a score calculated by a lender, as everyone uses their own unique formula, but it will show the impact your credit history has on your chances of getting the deals you want. The higher your score, the more likely you are to get a “Yes” - and enjoy a happy Christmas and prosperous New Year.

Maintenance programme

• Make regular checks on your credit report to monitor your progress and protect yourself against ID fraud - one of the 21st century’s fastest growing crimes. It takes place when a criminal gets hold of enough personal data to impersonate you, max out your accounts and borrow money in your name. Watch out for unfamiliar applications, new accounts you didn’t open, incorrect forwarding addresses or sudden increases in outstanding balances and follow up at once with the relevant lender. It’s free to see your Experian credit report during a 30-day trail of CreditExpert and you’ll also be alerted by text or e-mail if there is a significant change to your credit history that could indicate identity fraud.

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