A single mum who had accumulated £15k of credit card debt by aged 22 has revealed the steps she took to pay it off in less than two years.
Alex Wren, 25, from Sheffield, South Yorkshire, UK got her first credit card aged 19 - in the hope it would help her build up her credit score, to help get a mortgage in the future.
But before she knew it, she was developing bad habits and using most of her up to £3,000 limit to go on birthday and Christmas trips.
Alex Wren, 25, from Sheffield, South Yorkshire, UK got her first credit card aged 19 - in the hope it would help her build up her credit score, to help get a mortgage in the future.
But before she knew it, she was developing bad habits and using most of her up to £3,000 limit to go on birthday and Christmas trips.
Category
😹
FunTranscript
00:00At 22 I was in over £10,000 worth of debt, essentially made me bankrupt and the only
00:04option I felt like I had was to take out an IVA. So let me tell you what this is and whether I
00:08regret that decision or not. So at the end of 2022 I was nine months pregnant, had all these
00:13debts whether it was from credit or from loans and I was about to go on maternity leave earning
00:17about £600 a month and I knew I couldn't afford to keep paying these minimum monthly payments and
00:22bring a child into this world and this is where I found myself getting into an IVA. So if you get
00:26accepted for an IVA they look at your income and they decide how much that you can pay per month.
00:31So it essentially wipes off all the other debts and you just pay this monthly sum for five years.
00:35When you open the IVA all these debts that you put into it, all those going to default and obviously
00:39defaults stay on your credit score for six years as well as IVAs. Every year they do an annual review
00:44so if your income goes up you have to pay more. As soon as I signed that and this had got sorted it
00:49gave me peace of mind and for almost two years that was perfect for me. But then my income quite
00:53suddenly changed and I realised that it's better for me to just pay off the full thing because they
00:57were going to drastically up my payments else. With an IVA you can't take out new credit or like
01:01car finance, things like that unless you have permission and an IVA tanks your credit score.
01:06Despite the fact that I paid it off 20 months in it will still remain on my credit score for a total
01:10of six years which is the reason that I do regret it. It was the best decision for me at the time.
01:14If I could have predicted the future I wish I could have just held out for that extra year or so
01:19because it would have meant that I'd have been able to get a mortgage a lot sooner than what I am able to do
01:23now. If I want to get a good rate mortgage I'm going to have to wait until at least 2029.
01:27Debt should be talked about, debt shouldn't be a taboo subject. Many of us have it and so many of
01:31us have a bad credit score and I know a lot of us feel ashamed and embarrassed about it because
01:34that's exactly how I felt. If you are in this kind of situation you don't know what to do you want to
01:38learn more about these type of things that are step change and citizen's advice that can give you
01:42great advice on it. If you have any questions about IVAs or anything like that please let me know.
01:45You've took one out before, was it the best decision you made or do you wish you had more information?
01:49I was in 15k worth of debt at 21 and I worked super hard to get out of it only to be back in
01:55debt again. So let me tell you about it. Back in January 2022 I was in debt and I didn't feel like
01:59there was a way out because I just had a baby and I just didn't have enough money coming in to pay it
02:03off. So I took out an IVA and was paying £100 a month and that was meant to be for five years.
02:08But a year ago now my circumstances suddenly changed quite drastically and I was able to pay that IVA
02:13off in full and the moment that I paid that off I thought to myself I will never ever be in debt
02:17again. So the fact that I'm suddenly paying £6,000 off again is a bit of a shock and I want you to
02:22tell me if you think these are my fault or not. Part of this amount is a British gas bill and the
02:26majority of this bill was already in the IVA but part of it wasn't allowed to be just because of
02:31the date. So it's meant I've been paying that off monthly but that does come to an end in August.
02:35And then the bulk of this amount is DWP and essentially over a year ago now I became self-employed and I
02:40essentially didn't understand that every money that comes into this business account was my money to
02:44declare. Because at the time I was still on Universal Credit and when I got started out it was really
02:48fluctuating. So I paid myself a wage and then Universal Credit was topping it up and this was
02:52going on for like five months. And when I was finally earning a stable amount of money I closed my claim
02:56and got hit with a five grand bill. I am currently paying this off monthly because it's not making a
03:01big difference in my monthly finances. I don't know whether I should just bite the bullet and pay it
03:05all off in full. Let me know what you would do and let me know if you've ever been in a situation
03:08similar where you got out of debt and then unexpectedly ended back in it.