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By Credit Experts

Monday, December 22, 2008.

Predictions for 2009 make it a pretty daunting prospect, so it’s time to settle on some serious New Year’s resolutions of the financial variety. Start now and 2009 will be much easier to deal with.

1. Find out what you owe

Before you can make any plans, you need to know how much money you owe – and for what. The simple place to start is your credit report, which lists your credit accounts, from loans, cards and mortgages to utilities, mobile phone contracts and catalogue accounts. As well as your repayment history and the amounts you owe, it details applications for new credit accounts, court judgments, IVAs or bankruptcies and other information that lenders use when calculating your credit rating. There’s also a useful list of your lenders, which can act as a quick reminder of accounts you might forget.

2. Make a list

It’s always easier to get organised when you can see at a glance where you stand. Try making a list of regular outgoings, using your credit report as a guide and cross-checking with bills and statements. Key items could include your mortgage, loans, HP deals, the balance outstanding on credit and store cards, utility bills, including your mobile telephone. You should plan to honour all these payments – it’s just a matter of working out how you’ll do it.

3. Get organised

Organise all your bank statements, credit cards and utility bills into monthly files. Check your direct debits carefully and cancel any that should have expired or set up new ones to ensure you don’t miss any payments – some organisations offer a discount if you do this. Set up another file for your day-to-day spending, such as receipts for food, newspapers, petrol and fares. Make sure you arrange everything so you can see where your money is going in regular payments each month.

4. Set yourself a budget

Most of us will need to cut back, so use your list to identify any potential savings. For example, you might resolve to pay off your high interest store cards or reduce your utility bills. Make sure your budget is realistic, or you’re setting yourself up for a depressing failure – and always leave some money aside for treats and emergencies, or you risk falling off the financial wagon through sheer frustration or because of bad luck.

5. Think thrifty

There’s plenty of advice around, from buying food at markets and discount supermarkets to walking to work and swapping clothes. Hit the Internet for inspiration – there are sites that specialise in everything from economical food to free exercise routines and thrift shopping for clothes. Try voucher sites for money-off offers on essentials. You could also join an online service such as www.freecycle.org, where people offer to give away unwanted items. Or hook up with one of the many local networks that enable people to swap their skills – you can exchange anything from babysitting and cooking to carpentry and accountancy skills without paying a penny.

6. Get a good report

Lenders look at your credit report when you apply to them, so it’s crucial that it’s up to date and accurately reflects your circumstances. One administrative error or a misunderstanding several years ago could spoil your chances of getting the credit you want in future. If you disagree with any entries, contact the lender and be prepared to prove your point. You can also get in touch with the credit reference agency that keeps your credit report – Experian is the UK’s largest. Other tips include closing unused accounts and registering to vote at your current address.

7. Do your research

There are still good credit options on offer and it’s up to you to find them. It’s worth spending some time on personal finance websites and reading the personal finance sections of the papers to get an idea of what’s available. Price comparison sites can help to identify the best deals for your circumstances but don’t send out a mass of applications in the hope of securing one. Ask each lender or supplier for a quote first, as every application leaves a record on your credit report – if there are a lot in just a few months, lenders may think you’re desperate or even suspect a fraud.

8. Tackle expensive debts first

Assess your debts carefully and prioritise the ones you want to repay first – which means finding out which are costing you the most. It may be possible to take out a personal loan to pay off several smaller debts that charge high interest. If you have a good history with your bank, you may also be eligible for an overdraft at reasonable rates. If you’re one of the many people whose old fixed rate mortgages finish this year, it’s worth paying off as much as you can before searching for a replacement, so you qualify for more new deals or a lower interest rate.

9. Get help

Whether you’re unsure how to set your budget, don’t understand how interest is calculated or are frightened that you’re getting into financial trouble, there’s help out there. The website of the Financial Services Authority, www.fsa.gov.uk, is a good starting point, offering simple advice and a range of calculators. Mortgage brokers and your own bank can help you to decide on suitable deals and may come up with ideas you hadn’t considered.

Always talk to your lenders as soon as you think you’re in danger of letting them down – they may be able to suggest a temporary solution, such as extending the life of a loan to lower your monthly repayments. If you’re having real money problems, a number of organisations offer free advice – try Citizens Advice at www.citizensadvice.org.uk, the Consumer Credit Counselling Service (CCCS) at www.cccs.co.uk or National Debtline at www.nationaldebtline.co.uk.

10. Keep on top of your credit status

Resolutions are meant to last, so check your credit report regularly. It gives you a snapshot of how well you’re managing, allows you to monitor your progress and gives you a chance to clean up your act before you approach lenders. Since prospective employers and landlords can also ask for permission to see some of your credit report, it’s a priority to ensure it’s as good as it can be. You can see your Experian credit report for free with a trial of CreditExpert, the UK’s leading online credit monitoring service.

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