How to battle those family budget cuts

Rising prices and unemployment are forcing mothers to make tough choices about the family budget, according to a new survey known as the Mumdex.

Three-quarters have lower disposable incomes than a year ago, around 42 per cent have had to accept a cut or freeze in the household budget and 23 per cent are borrowing to get by.

Perhaps the most telling detail to emerge from the research (by Asda) is that one mother in four is either returning items at the checkout or swapping value products for the brands their families prefer, hiding the truth from their children by refilling old packaging.

The news comes a week after another survey by Mumsnet that found a quarter of families are living on credit cards, five per cent have turned to payday loans and one in 100 have resorted to loan sharks to stay afloat .

Itís a grim picture in what weíre accustomed to regard as an affluent society but it does demonstrate that parents are using their imaginations to take control of their family budgets.

Understanding how credit works could help them to do even better ñ and save them valuable cash. The answers could be here.

Am I creditworthy?

Lenders look for people who can show that theyíre responsible borrowers. To check, they look at your credit report, which lists your credit accounts and repayment record. Even a minor error can affect your chances, so you should check to make sure itís accurate and up to date.

How do credit scores work?

To assess the risk that you wonít repay what you owe, lenders take information from your credit report and application and allocate each item a value. The total is your credit score. A higher score is more likely to net you the best deals ñ the difference between them and the most expensive offers can be thousands of percent in interest over a year.

What can I do to improve my score?

First, you can challenge any errors you may find in your credit report, such as accounts not having been updated, for example with a new address or your being named on the electoral roll. Then close any unused accounts, such as emergency credit cards or outdated catalogue or mobile phone accounts. If past payment problems were down to special circumstances, such as illness, you can also add a note of explanation. You can monitor your Experian Credit Score and credit report with a free 30-day trial of CreditExpert to see how well youíre doing.

What if Iím struggling to make my repayments?

Donít ignore them ñ a missed or delayed payment stays on your credit report for at least three years, warning lenders that you may not be reliable. Instead, contact the lender and see if you can negotiate a more affordable schedule or repayments or take a short repayment holiday. The key is to keep them informed.

How do I get the right deals?

Do your research first ñ use personal finance sites and price comparison sites to see whatís out there. Only apply when youíre sure youíve found something that suits your circumstances. Each application leaves its mark on your credit report, so if you fire off lots of applications in a short period, other lenders may think youíre desperate or suspect a fraud.

What if I am desperate?

If youíve already got money troubles, borrowing more isnít likely to be a way out ñ you could end up in more debt.

Contact Money Expert for Debt Advice.



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