Debt & Bankruptcy Issues in the UK

Your postcode can tell a lot about whether you are likely to have county court judgements (CCJs), according to new research. The study from Callcredit, an online credit record checking service, has found that the areas where most CCJs (a legal action brought for outstanding debt).were registered between 2005 and 2006 had certain things in common.

Of the 0.75 million CCJs registered in the 12 month period, 55 per cent of the population live in an area where none was recorded. However, 15 per cent of the population live in an area where three or more were recorded in the last year. These areas tend to be urban, with lower than average value properties and higher than average use of mail order shopping. There also tended to be lower than average levels of car ownership and – interestingly – a higher than average number of people taking out payment protection insurance.

"Where you live can reveal so much about your life from whether you're likely to have a CCJ to how likely you are to own a car or have access to the internet," said Mel Mitchley, director of Callcredit. "Our research found that 55 per cent of the population live in postcode areas where no CCJs were recorded in the last twelve months. We also found that those postcodes with the highest numbers of CCJs per head of population tended to share certain demographic characteristics."

Ms Mitchley continued that although the number of CCJs stands at only 20 per 1000 adults, these figures may be on the increase: "But a combination of record levels of personal debt combined with the recent interest rate rise could mean that over the next year we start to see CCJs in neighbourhoods that have so far been unaffected." Many people are turning to debt consolidation loans in order to keep their heads above water.

New research from the Consumer Credit Counselling Service (CCCS) has revealed that people in their 50s suffer the worse debt problems. Despite an overall decline in credit card spending, people aged 53 and over are increasing their spending amounts.

This has meant a knock-on effect of a 23 per cent increase in the number of over 50s seeking advice from the CCCS. A CCCS spokeswoman said the over 50s had become the 'Barclaycard Generation' and were prepared to spend on plastic than other methods of payment.

Frances Walker, spokeswoman for the CCCS, said: "The Barclaycard generation, which has grown up with credit on tap, needs to learn how to turn off that tap before they are flooded with debt."

She added that this group have the extra pressure of supporting their children and sometimes their own parents, which may lead them to turn to credit cards.

A debt consolidation package can help consumers to re-order their finances and avoid bankruptcy.

The Competition Commission (CC) has proposed a need for increased competition amongst home credit providers.

It has made the plea in order to help lower the cost of borrowing for consumers and the plans put forward by the CC include making sure doorstep lenders share data on payment records.

Also proposed is the necessity for doorstep lenders to give better information on the total cost of borrowing.

Doorstep lending involves the borrowing of small cash amounts with interest paid weekly – it is usually applicable to those with poor credit ratings.

The CC's proposals follow an investigation earlier in 2006 which showed that borrowers who utilised doorstep lending have been overcharged in the region of £100 million.

A secured loan from a company such as NEMO often provides a much better rate than is available from doorstep lenders.

The UK payments association APACS has published a new report underlining how consumers can check their credit report. The publication of the advice guide, titled Checking your Credit Record, has come off the back of research from Experian showing that only one in 20 UK consumers have opted to check their credit report.

On top of this, the Experian figures showed that a considerable 21 per cent of people, or one in five, are unsure of what their credit score is. As a result, APACS has launched a guide to assist UK consumers in the significance of their credit record and the benefits of undertaking regular checks. The new guide also covers areas such as what information is held, how to check records and importantly, how the records are used by lenders in making borrowing decisions.

Sandra Quinn, director of communications at APACS, said: "We hope out new guide will give people a quick route to find out everything they need to know about their credit record.

"The fact that only one in twenty people check their credit report is not good news and we would like to see this figure improve. We would encourage everyone to check their credit report at least once a year – not only is it the best way to ensure they don't have trouble accessing credit when they need it, it can also provide peace of mind that they have not been a victim of identity theft and that no one has successfully applied for credit in their name."

With recent research showing rising levels of debt, the checking of credit records is an important step for consumers to take if they are to stay ahead of their finances. Remaining unaware of one's credit rating could mean consumers have difficulty taking out homeowner loans and fall further into a financial quagmire. Taking out a secured loan can often prove to be a crucial step in helping consumers consolidate their debts and get ahead of their money situation.

The Consumer Credit Counselling Service (CCCS) has said that recent rises in utility bills and taxes or pushing many people into debt. The CCCS claimed that their clients were paying over £30 more on average in utility and council taxes than in 2003.

For individuals who are already struggling to pay their bills, the recent interest rate rise will no doubt add further debt misery for many.

In May, Citizens Advice said that their clients would take an average of 77 years to repay their debts, effectively leaving them with a lifetime of debt. The CA also that the number of people seeking debt advice had doubled in the last 8 years. Most of their clients are in the low income bracket, with averages debts of £13,000. Many of these individuals simply can’t afford the fees necessary to declare themselves bankrupt, and would likely struggle with an IVA (Individual Voluntary Arrangement).

The CCCS has asked that the utility companies freeze bills for people receiving debt help and advice. Over the last year all the major gas and electricity producers have increased their prices. From September this year, electricity prices will rise by 9.4% and gas prices by 12.4%.

The CCCS urged the energy companies to hold back on the price rises for people in debt management plans.