# Credit concerns



## wexford2009 (5 Dec 2008)

Age
Me: 34 
Spouse: 35

Employment
Me: Employee
Spouse: Employee

Gross Income
Me: 95,000
Spouse: 23,000

Property: Mortgage currently 190,000 over 17 years (tracker +0.9% over ECB) - Repayments circa €1350 a month

Other Borrowings:
This is the bad bit -
Credit Card - €15,000 (missed a few monthly payments recently so credit rating won't be great)
Credit Card 2 - €3,300
Rabo Loan - €18,000
Car Loan - €4,000
Wife car loan - €3,000
No Overdraft but have been constantly going overdrawn, so much so that bank canceled laser card.

I know most people will say how can you be in this situation when earning such a good salary but the current loan repayment (excluding mortgage) are coming in at 1600 a month. Until recently I was earning half the salary I am currently on and I've had loan after loan after loan. So I still feel that I'm trying to catch up constantly

Savings
Put €600 into Credit Union monthly for planned purchases (furniture / holiday) - Currently 1200 left in there

Pension
Me: €1,250 monthly
Spouse: €150 monthly

Kids:
2

Life Insurance:
Life & critical illness costing circa €500 annually
Job provides death in service of 4 x salary

Spender or Saver: 
Spender

My Question/s:
1. Looking at extending the house and want to look for mortgage topup. Worried that missed credit card payments will adversely affect application. Would a recent wage increase (around 25K) offset a potential poorer credit rating? Recently tried to increase car loan for wife to get a new car (10K increase) and loan was turned down

2. As part of the topup I want to clear all outstanding loans (about 40K) and never have a credit card again (I can't manage them). I'm concerned that trying to clear these will look bad as part of the mortgage top up. Need 55K for property build.

Ideally I'd like to consolodate all into the mortgage loan to free up a bit of monthly lee way but have a good feeling that mortgage topup will be refused. Any suggestions on how to improve credit rating and am I looking at 1 year + to be in a good credit place to get approval on loans again.

Thanks for any help / advise / hard truths that you are kind enough to provide me.


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## PaddyW (6 Dec 2008)

If it was me, I wouldn't even think of going near a top up for the time being. That 600 a month being put into credit union would be better off put into clearing your loans first. Maybe put furniture/holiday on hold for forseeable future until you've made a huge dent in those loans. Start a spending diary and find out exactly where all your money is going. You're going to have to make some sacrifices. Stick with the old car for now, you don't needed the added outgoings of a new car loan. Your increased income should give you extra money to throw at those loans, clear them asap before even considering taking on extra loans.


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## Padraigb (6 Dec 2008)

I read wexford2009's post shortly before going to bed, and fell asleep asking myself if this is for real. Over €43,000 in short/medium term liabilities, and he wants to bring that over the €50,000 level, then take on a capital programme and bury the lot into an increased mortgage.

And all the time trying to budget over €7,000 pa for holidays and furniture and not managing to pay current debts.

Hard truth: I wouldn't lend €100 to anybody who was so improvident. 

Cut up the credit cards and work hard on reducing the debts in that area -- it's expensive borrowing. Consolidating debt is worth doing only if it costs of servicing that debt. If you convert your medium-term commitments to long-term commitments, I would fear that you would find yourself taking on more medium-term debt, and replicating your present problem.

It's time to trim the sails.


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## wexford2009 (6 Dec 2008)

Thanks PaddyW and PadraigB

I started a spending diary last month and it has really shown me how loose I have been with spending. I've cut back on all non essentials and the credit cards have been cut up.

I suppose when writing this last night I was hoping I could bury it all in long term and start a fresh, I now realise that I have to suffer for my overspending  and not bury my head in the sand. You are right PadraigB, it would only lead to further medium term loans as it has done in the past.

Again, thanks for taking the time to reply.

Wexford2009


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## Padraigb (6 Dec 2008)

Good luck with the new programme.


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## babyspice (6 Dec 2008)

get a loan from the credit union, simple


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## Don_08 (8 Dec 2008)

Seriously - why are you even thinking about extending or buying new cars?

You should be pulling in over €7k a month after tax and before pension. Pay the minimum required into your pension for the year. €1250 sounds like AVC on top of the minimum.

Set aside a budget of €2k to cover bills and other expenses.

Then you have €1350 for mortgage, €1600 for repayments and chuck the rest into the credit cards. You could make a serious dent in them.

If you just got that massive payrise then put it all towards the debt. And every time the mortgage repayment falls, put the excess against credit cards. Tackle the highest interest first. 

Credit Card 2 could be paid off in month one, use the €1200 in savings and your €2k extra. You'll see it falling off in no time. Just stop spending.

And set up direct debits for those credit cards, no excuse for missing minimum payments.


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## wexford2009 (8 Dec 2008)

Thanks everyone for taking the time to reply.

Your advise is exactly what I needed to hear, have setup direct debits for the cards and set up my bills/loans to be paid on a highest interest first basis and will manage with the current cars!

Thanks again everybody.

Wexford2009


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## PaddyW (8 Dec 2008)

Good luck with it.


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## circle (8 Dec 2008)

I'd use the credit union savings to pay off any missed payments to date on the credit card - write to your bank and tell them you are doing this and that you hope any effect on your credit rating will be minimised.

Forget completely about new cars, extension etc. until you're clear of unsecured debt.

Reduce your pension payments to the minimum you need to input to gain any matching contributions from your employer. The same with your partner's pension and I'd also question whether a second pension for someone who won't be gaining relief at the higher tax rate makes sense at all for you both.

Work out what interest rates are highest and plough your monthly excess into these, repeat until clear


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## Flax (8 Dec 2008)

Stop your pension and monthly savings and use both of them to pay off your loans.

Unless you learn to prioritise your expenditure you are always going to have money problems. Sort out your debt and then save for your future.


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## Don_08 (9 Dec 2008)

wexford2009 said:


> Thanks everyone for taking the time to reply.
> 
> Your advise is exactly what I needed to hear, have setup direct debits for the cards and set up my bills/loans to be paid on a highest interest first basis and will manage with the current cars!
> 
> ...


 
Glad to hear it - was in horrendous debt many years ago and had my head in the sand about it. Finally cleared the €62k loan I had to take out to clear it all three months ago and its such a relief.  And the bonus is as I was paying such a high loan repayment that is now going straight into savings.


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## wexford2009 (10 Dec 2008)

All, I really appreciate all the advise and help you have all so kindly and freely offered. My head is in a strong doing space right now and I've diverted the excess from my pension directly to reduce the credit card bill. I've taken the €1200 from the credit union and paid this directly off too so I'm on the right path, finally.

Well aware that I'm at the very start of the path but with stories like Don_08's it's highly encouraging to get to the end of the path as soon as possible and start living my life within my means from now on.

Again, thanks everyone.

Wexford2009


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