Frequently asked questions about credit and debt

This information applies to England, Wales and Northern Ireland

My debts are getting out of control and I can’t possibly pay them all. What can I do?

If you are worried about your debts, try not to panic but do not ignore your problem. Talk to the people or organisations you owe money to and let them know that you are having problems. Most organisations will be more helpful if you approach them first.

If you have more than one outstanding debt, or have fallen behind in paying your bills, you need to work out which debts are priority debts. A priority debt is one that could have serious results if unpaid. Not paying your rent or mortgage would leave you homeless, or not paying your gas or electricity bill could leave you being cut off and taken to court. When you have decided which are priority debts, work out how much you can realistically afford to pay back.

You will need to think carefully before taking out further loans to pay off existing debts. You may end up paying back a lot more than you borrowed and the interest rates may be extremely high. Some loans can be secured against your home and you could end up losing it if you fail to make repayments. Check your income and see if there are any benefits or tax credits you are entitled to that you are not getting. Look carefully at your spending and see if there is anything you are able to cut down on, again you can work out what are priority expenses and what things are not so necessary. You can also look at ways of reducing your outgoings, for example you could shop around for a cheaper gas or electricity provider, or look at cheaper mortgage or insurance providers.

Another option might be to go bankrupt. For more information about bankruptcy, see Bankruptcy, in Credit and debt fact sheets.

You do not need to pay for debt advice. Your Citizens Advice Bureau gives free, independent and confidential advice. They can help you work out repayments and negotiate with your creditors. For details of your local CAB, including those that give advice by email, click on nearest CAB.

I have been refused credit to buy a new washing machine. What can I do?

If you have been refused credit, you can re-apply to the same company or try somewhere else. If you are still refused credit, it may be that you have a low credit score. This means that the shop selling the washing machine has used a credit reference agency to look at your credit rating. The shop should have told you that they would use this method to decide whether or not you can have a washing machine on credit.

You can ask the shop which credit reference agency it has used. Write to them and ask for a copy of the file they hold on you. You will have to pay a fee for this, but it is usually quite low. If you think your record has incorrect information about you on it, you can ask the credit reference agency to correct it.

You might also want to look into other methods of paying for your washing machine.

For more about credit and credit reference agencies, see Credit.

I have a county court judgment against me over an unpaid credit card debt and the card issuer has threatened me with bailiffs. What can I do?

(This information applies to England and Wales only)

The first thing to do is to try and negotiate with the company. Even if you can't pay the debt in full, you could try to agree a set amount to pay weekly or monthly.

If you cannot come to an agreement with the company, they will need to get a warrant of execution from the courts before they can send in the bailiffs to remove property from your home in payment of your debt. If they already have the warrant, you should apply to the court to have it suspended.

If the bailiffs arrive, you do not have to let them in and they cannot generally force their way in. However, they are allowed into your property without your permission if they can enter without breaking in. This is called 'gaining peaceful entry' and includes getting in through an open window, or a closed but unlocked door.

Bailiffs are not allowed to take basic clothing, bedding, furniture or household goods, and any goods they do take will be sold at auction in order to pay off your debt.

The rules about bailiffs are complicated, and it is always sensible to get advice from a specialist adviser. For more information, see Help with debt or, in England and Wales, look at our fact sheet on Bailiffs in Credit and debt fact sheets.

I am going to live on my own for the first time and am worried about how to manage my budget. What can I do to prevent getting into debt?

Try not to be intimidated by money matters. Keep track of how much money you have coming in and how much you have to put aside for bills, rent and food. You may find it helpful to set up standing orders and direct debits to pay your bills. Arrange for payments to leave your account soon after your pay date. If you can, try and save some money each month as a general savings plan or to cover emergencies when they arise. Make sure you look again at your budget each time there is a change in your income or any other change that might affect your finances.

Always shop around for the cheapest gas, electricity, telephone and insurance deals. There are many to choose from now.

Be careful about buying goods on credit. The interest repayments can be quite high. Also, be careful about interest free credit. It may seem a good deal but if you fail to repay the full amount before the end of the free interest period, you could find yourself paying the full interest, even if you are one day late on your payment. Try to pay at least 10% of your balance every month on your credit cards.

Don’t just run up an overdraft without talking to your bank, you will be charged for unauthorised overdrafts.

Be very careful about taking out any loans. Read and familiarize yourself with the terminology. Most important, know the difference between secured and unsecured lending. If you take out a secured loan, you are using your house as surety and may lose it if you cannot make the loan repayments.

I think someone may be using my credit card details without my knowledge. What can I do about it?

You may be a victim of identity theft. This is a type of fraud which takes place when someone you don't know gets hold of your personal details and uses them to access your account.

If you have been a victim of identity theft and your card is still in your possession, you will not have to pay for anything bought on it without your permission. If your card has been stolen, you will usually not have to pay, unless it can be shown that you have acted fraudulently or without reasonable care, for example by keeping your PIN number written down with your card.

You must act quickly: contact your credit card company straight away, keep a record of all conversations you have with them, and copies of any letters sent or received; and report the matter to the police, and get a crime reference number.

For more information and advice about credit card fraud and identity theft, go to www.cardwatch.org.uk, or to the Home Office website at: www.identitytheft.org.uk.

A bank that I do not normally deal with has contacted me to chase an outstanding debt. I think I may be a victim of identity theft. What should I do?

Identity theft is a type of fraud which takes place when someone you don't know gets hold of your personal details and uses them to apply for credit or to open an account in your name.

If you have been a victim of identity theft you will usually not have to pay for any money you have lost, unless it can be shown that you have acted fraudulently or without reasonable care, for example by keeping your PIN number written down with your card. You must act quickly:

contact the bank straight away, keep a record of all conversations you have with them, and copies of any letters sent or received
report the matter to the police, and get a crime reference number
check with the credit reference agencies (details below) whether any applications for credit have been made in your name. If they have, you can ask to have the information removed from your file
if you suspect that someone has got hold of your details by stealing your mail, or has fraudulently applied to get mail redirected from your address, you should contact the Royal Mail Customer Enquiry Number on: 08457 740740
contact CIFAS, the UK's Fraud Prevention Service at www.cifas.org.uk. For a small fee they will make sure that anyone applying for credit in your name is automatically double-checked.

The credit reference agencies are:

Experian

Tel: 0870 241 6212
Website: www.experian.co.uk

Equifax

Tel: 08705 143700
Website: www.equifax.co.uk

Call Credit

Tel: 0870 060 1414
Website: www.callcredit.co.uk

For more information and advice about identity theft, go to www.cardwatch.org.uk, or to the Home Office website at: www.identitytheft.org.uk.

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