Credit Repair You Can Do Yourself

This is obviously going to be difficult! We have all been through a turbulent time and some say we are not through it yet, all sectors look battered and bruised. The private sector has been badly hit and those that have come through the other side (if we are indeed through) are risk adverse, the scar of the recession lingering on and festering like an infected wound. The public sector hasn’t fared better but they have only really started to see the pain. Believe you me it’s only going to get worse there!

Even though the country are warned against a change in career path due to a lack of openings, there are many who have absolutely no other option. Enforcements such as wage freezes and jobseeker and benefits cuts, as introduced by the coalition, are forcing individuals to look for other ways to secure a stable income. The British Economy is undoubtedly in a worse than dire situation which has caused a lack of available credit and huge amounts of debt. Among Britain, the US and Europe, there is barely a country left that doesn’t either owe someone else money or who are owed capital themselves; it’s a vicious cycle that all are struggling to break free from.

However, after speaking with Jonathan Davis, a wealth management expert and regular media advisor, our minds have been eased slightly. He emphasised that sever wounds such as these take a long time to recover so an element of patience is essential, “The big picture is that for 30 years, we’ve had a growing debt problem- not just in the UK but right across the West. That bubbled in 2006-2007, and now we’re experiencing the hangover of the debt party. I refer you to the 1930s, and the depression based upon de-leveraging effects following, by then, the biggest debt bubble in history during the 1920s. This time it’s from the biggest debt bubble of all time”.

“The banks are, technically, insolvent themselves. You’d be hard pushed to find a bank or building society in the UK that is solvent, when real assets are taken into account. It’s all well and good to have property, but if that lies vacant, and there’s a loan outstanding, then it’s a loss. Look around in every town, in every city. Look up, and you see To Let everywhere. 10 per cent, or at least 10 per cent of shops are lying empty, then you’ve got warehouse, office and manufacturing facilities. “In other words, you’ve got an enormous swathe of bad debt coming down the line. That’s one of the reasons banks are reducing lending, because they know they will be cutting red ink right across the balance sheet in due course. On top of that they also have the wider G20 issue, of what’s called Basel 3, which is a change in the regulations of international banking,” Davis continued.

As we call for tighter banking regulations, it still seems as though the average British Citizen is the one bearing the brunt of the current state of affairs. Amidst the bailout controversies lays the Basel 3 agreement, which emerged from the G20, which calls for banks to have a higher level of constant cash reserves. As a result, the banks are limiting what they lend, a level that is unlikely to return to its pre-recession levels for quite some time. Davis reiterates this, “Basel 3 is to prevent a future bubble emerging, followed by a crash. We’re still in one crash right now, and it will continue for years”.

So it doesn’t look like we’re going to see much change in how much we can borrow, or at least how easy it is to find a loan, anytime soon. But does this mean the UK is set for a dramatic rise in high-interest or, worse still, unscrupulous loans? “People are already massively in debt. The amount of debt, in particular credit card debt, in society is more than there ever has been. I read surveys from big financial institutions that say if the cost of living goes up £100 per month, people couldn’t afford to live- that’s how bad it is,” said Davis.

“So, I don’t believe, in fact I cannot see that people will be getting even more into debt, simply because society is already maxed out. The banks are actually discouraging folk from taking on more debt by increasing interest rates, way beyond the base rate- really it’s all they can do, it’s not because they want to.”

His prediction is that “people will not be taking on more plastic credit, they will not be increasing consumer spending, they will not be taking on mortgages, because they simply can’t.” Returning to our original point, the issue is that the banks just don’t have the money any more. According to recent statistics the number of mortgages obtained is at its lowest level for 10 years.

The biggest worry when it comes to a lack in lending by the banks is the increased potential of an emergence of unscrupulous loans that can scam the vulnerable. Davis warns that “once you start dealing with those types of businesses you’re hiding to nothing – they’ll just take your house off you for the sake of a few thousand pounds”. Unfortunately, such companies can, on the face of it, have attractive offers, but they will take no prisoners when it comes to repayment. However, MP Stella Creasy is currently on a mission to place restrictions on these so-called ‘legal loan sharks’.

It will be an imperfect and imprecise art trying to predict the future, but the reasoning behind Davis’ predictions is grounded in common sense, the gravy train was going to come off the rails at some point with hindsight. It’s a culture shock, one we have no choice but to get use to, but the long term benefits on people’s attitudes to spending and budgeting can only be a good thing. Is there credit to be had after the crunch then? No, well yes, there is, but the way to success and better finances is by reducing debt and overspending, getting some free debt advice then plugging the gap with credit lines to keep level. If you’re stuck, just man up, admit you have a problem and get much needed help.

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