Beating the credit crunch

Batten down the hatches there are storms ahead.

It’s going to be a long hot summer and a cold hard winter. Financially anyway. If you’ve got a mortgage you must be wondering whether the credit crunch is going to bite you on the bum. It might. Especially if your mortgage deal comes to an end this year. One and a half million of us have a fixed rate ending soon and more than two million have a tracker or another deal ending in the near future.

They will all be more expensive to replace. So start working now to make sure you get the best deal out of the limited choice that will be available.

Step one – Keep your credit record clean. Lenders are getting fussy. Time was if you had a current account and a vote you could borrow pretty much what you wanted. Not any more. Any blemish on your credit record can make the computer say no.

So meet your payment dates on credit cards, loans, mort-gages, and mobile phones (other utilities are not yet part of your credit record). Make sure you are on the electoral role. Don’t enquire about taking on new debts, it leaves a footprint. Get a copy of your credit record (£2 only) and see if there is anything on it that may count against you. If there is and it is not true get it changed.

Step two – Cancel the next treat you have planned for you or your beloved. Every £10 you spend on a treat for yourself – or someone else – is £10 that has not been taken off your debt. And be honest – that treat is more like £100 than a tenner!

Step three – Cancel the treat after next as well. Use the money you save on Step four and five.

Step four – If there is a chance that you will not be able to remortgage for the whole amount of your debt then start saving. Remember 100% deals have gone and 95% loans may be on their way out.

Alternatively start over-paying on your mortgage. Remember £100 off your mortgage is not just for Christmas. It is for life.

Step 5 – If you have other debts start paying those off too. Begin with the highest APR.

Debt free is the best treat you can give yourself.

Paul Lewis is a freelance writer who presents Money Box on BBC Radio 4