I racked up debt after my salary dropped by £20k – then I discovered a ‘life-changing’ tool and now I’m a homeowner
A DAD-OF-TWO was left in financial ruin after amassing £6,000 of debt – but now he’s a homeowner after boosting his credit score with a simple tool.
Derrick Gough, from Swindon, hit rock bottom when his salary unexpectedly dropped by £20,000 and he realised he had £6,000 of debts he couldn’t pay off.
The 45-year-old, who works in retail – an industry hit particularly hard by the pandemic – had never been bad with money before, but he couldn’t have prepared for such a huge drop in his earnings.
When the pandemic hit and shops were forced to close, his salary took a huge hit and he ended up getting paid far less than he was banking on.
Soon, Derrick had credit card debts he couldn’t seem to pay down and he was juggling several accounts with different buy now, pay later (BNPL) schemes.
“It was devastating at first,” he said.
“I started burying my head in the sand because I didn’t want to face the spiralling debt.”
But soon it became a problem Derrick couldn’t ignore, as his credit score dropped to just 123 out of a possible 999 and the interest on his debts kept piling on.
“By the time I started seeking help for the debts, the total amount I owed including interest had risen to around £6,000, which was horrifying.”
Derrick knew he would need to make serious changes to his lifestyle in order to boost his credit score and pay down his debts.
“I started properly researching about credit and realised it’s such a huge part of our lives, whether you’re taking out a phone contract or looking to buy a house, and it’s not really taught in schools.”
“You have to have credit and with the right knowledge, you can build up your credit score.”
Derrick realised he needed to start cutting back on all unnecessary expenses so that he could clear his debts.
He started living off just £1,000 a month after paying for rent, essential food and bills.
“I essentially got rid of everything including my gym membership, all subscriptions and I lived off yellow sticker foods for a few years,” he explained.
“The only thing I wouldn’t compromise on was getting things for my kids, so I sacrificed everything I could myself and put any spare cash I had into paying off my debts.”
Once Derrick had cleared his debts, he looked for ways to build his credit score back up and get his finances back on track.
For example, he learned he needed to be on the electoral roll and keep his bank accounts open for a few years to boost his score.
But then he found a one “life-changing” tool that really turned his situation around by giving his credit rating a much-needed boost.
“I used Loqbox to boost my score, which is essentially a saving scheme dressed up as a loan but it’s great for credit,” he said.
Loqbox helps savers boost their credit score by up to 300 points within 12 months.
It works by lending them a minimum of £240, which stays locked away in their Loqbox account.
Over the course of a year, users pay £20 a month into their Loqbox account to pay back the loan, boosting their score in the process.
It took Derrick four years to get his credit score back up to perfect – a boost of over 800 points – and completely clear his debts, though some parts of his credit history still affect him today.
He has now managed to buy a three-bed semi-detached home with his partner, but he had to put down a sizeable 25% deposit.
“Because of my score, we only had one choice for a lender so that was the best we could do,” Derrick explained.
Because of his damaged credit record, his mortgage payments are also slightly higher than the average – which is already high as mortgage rates have soared over the past few years.
“My partner and I are stuck on a horrible fixed rate which was higher than 6% for two years, so the new rate will actually be a drop for us.”
Despite the high upfront cost, Derrick is thrilled to finally be a homeowner.
“I love having my own home. As a renter in the past, I’ve been kicked out of a property through no-fault evictions and I’m glad that can’t happen again,” he said.
Derrick now makes sure he keeps on top of his finances and that he has savings in case anything unexpected happens like a salary drop.
“My partner and I go through our bank statements every month in monthly budget meetings and analyse our expenses. We’re always checking if we can cut costs anywhere.
Derrick is now teaching his kids about the value of money so they don’t get into the same situation he found himself in.
“My kids have a spreadsheet with all the jobs they do around the house, they earn pocket money from the chores so they can go out and buy things.
“I hope they will teach them to value what they earn. If they want something big they will have to plan and save for it. I want them to think ahead not just live in the moment.”
How to boost your credit?
There are a number of simple ways to build up your credit score.
For example, there are credit cards that can help you build your credit score called “credit builder cards”.
These usually have a lower limit than regular credit cards, although they come with higher interest rates.
But as long as you pay off the balance each month, you won’t incur any interest and your credit score should rise in four to six months.
Only borrow if you can afford to pay it back — as missed payments will negatively impact your credit file.
Make sure you signed up for the electoral register, and if you rent, register to report your rent to at least one credit agency like CreditLadder.
Tom Eyre, co-chief executive officer and co-founder of Loqbox said: “Knowing what affects your credit score, how to improve it, and what scoring category you fall into, are all fundamentals that can help you lift the fog of the mystery of money.”
Your three credit scores
EVERYONE has separate credit scores with each of the three credit reference agencies – Experian, Equifax and TransUnion.
Each holds different information about you, including details of credit, mortgages, county court judgements and individual voluntary arrangements.
The CRAs provide customers with three discrete credit scores, but lenders don’t use these, according to Sara Williams, founder of Debtcamel.co.uk.
Lenders check your credit file instead, but they don’t tell you which agency they use.
A bad score is a sign that you are likely to have trouble with credit applications.
Visit checkmyfile.com to see your Experian, TransUnion and Equifax reports in one place.
Debt advice
There are also many steps you can take to help avoid an insolvency or bankruptcy if your debts are mounting.
The very first thing you should do is prioritise your debts – start by paying off the debts with the highest rate of interest first.
Then, consider your monthly income and expenditure and trim the fat by cutting back spending for anything other than essentials.
You should also review your list of direct debit and standing orders with your bank.
Some mortgage lenders allow for a payment holiday or will let you switch onto an interest-only repayment plan if you’re struggling.
You can speak to them about your options without any negative consequences.
Also, consider ways to supplement income, such as by renting out a room or selling second-hand items online. You may be able to claim some tax reliefs for this.
Take advice from Citizen’s Advice or a debt charity if you’re struggling.
Be aware that there is no need to pay for debt advice – genuine advice is freely available.
If you take advice early enough, you may be able to avoid an insolvency procedure by budgeting carefully and managing your debts.
How to get free debt help
THERE are several groups which can help you with your problem debts for free.
- Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange – 0800138 1111
- National Debtline – 0808 808 4000
- Debt Advice Foundation – 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations – don’t be tempted to use a claims management firm.
They say they can write-off lots of your debt in return for a large upfront fee.
But there are other options where you don’t need to pay.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories