Ideas for lowering debts and improving credit scores

I am not a financial expert, just a regular guy who has somewhat successfully taken control of my finances. My financial education started and ended with my mother telling me it was good to save, followed by my bank offering me a £2000 credit card (free money to a teenager). Fast forward to my mid 20’s and I was £20k plus in debt realising how free that first card wasn’t. Fortunately, I have been able to get my debt to a manageable level and my credit score has followed.

Here is a short list of things I did and continue to do to get my debt under control. You can do it too:

1. Be obsessive. Check your bank and credit card statements every day, week or every time it comes to mind. Even if things do not change much or often keep your finance a priority.

2. Be ready to fail a bit. You are trying to reset habits that got you in debt and/or with a bad credit rating; it is going to take time and your going to slip up. Bounce back asap and get on with the task at hand. Follow point one and you will catch the slip up quicker.

3. Think long term. Your credit score may drop a bit, it may rise a bit it may drop a bit and so will your debt. Think slowly but surely, do not beat you self up, some actions such as a new application for a 0% balance transfer can have a short term negative effect on your credit score.

4. Track, track, track. Put it in a spreadsheet. I preferred to track all of my finances in mine, income, expenditure, assets (almost none at the time) and debts but it is ok just to have your credit cards. Having formulas to show how much interest I was paying on each card was super helpful to me and allowed me to plan my attack and celebrate each reduction. Here is a sample of my spreadsheet:

5. Look for balance transfer cards. 0% interest balance transfer cards were a God send for me. Although not an option for everyone, if you get one, make a plan and try not to waste the interest free period by using the interest you are saving to reduce your balance. Important things to consider: the length of the offer, level of interest at the end of it, the fee to transfer, and if you believe that in time you have a credible plan to pay off an amount that significantly out weighs the fee.

6. Tackle the high interest cards first. I had two credit cards, Barclaycard and Vanquis. My Barclaycard held about £9000 and my Vanquis £3500. I began tackling Barclaycard first as the balance was way higher until I put the numbers in my spreadsheet and clocked (realized) that the card with the lower balance, at 47% was costing me more than double the interest. It had to go, I concentrated all my efforts on getting rid off that card first and magically found and extra £350 a month to put towards the other card.

7. Ask for help. I did not go this route but, if you have a loved one that can assist you interest free do not let pride get in the way. But, don’t lose a relationship! Be honest, stick to the agreement and communicate.

8. Experian is now free. Download the app and keep tabs. And keep point 3 in mind, it may go down temporarily as you make positive changes.

9. Look at your full report. And cancel the subscription every 6 months. With your report in hand make calls and add notes to debts you contest or have been paid off. In short clear up any discrepancies.

10. Ask for a reduction in rates. If you don’t ask, you don’t get. I called up Vanquis to politely reduce my interest rate and got a quick: no thank you. Undeterred I called Barclaycard and repeated my long term customer spiel, requesting a 10% reduction. Not only did I get a reduction (not as much as I wanted tbh) but I was given a 6 month period interest free which made killing off my high interest Vanquis even quicker.

11. Avoid debt resolution services. I would opt for discipline instead, but not under all circumstances. If you feel you really need to, do it, but consider the long term impact on your credit vs your future financial plans such as, a mortgage.

12. Make more money. Not as easy as it sounds but do what you can, ask for a raise, sell things that you do not use, come up with a side hustle, mow lawns, it does not matter, just don’t spend the added income on video games, chop down that debt tree.

Once again, I am not A financial expert but I have endeavoured to become an expert of MY finances and you can too. Good luck!

Awaduwa kyinkyin a onya abɛ wɔ

Bonus track:
13. Use your credit card. Once your debts are cleared proceed to use your card monthly on an affordable purchase, that you would buy with cash anyway, and pay it off pretty much immediately. This will continue your positive credit track record adding points to your score.