The shock is enormous – there’s a letter from a debt collector on your doormat, demanding that you repay what seems like a huge sum of money. Worst of all, you can’t imagine how you came to owe it.
With personal debt in the UK topping £1.4 trillion, it’s not surprising that debt collection services are booming – or that some mistakes get made.
Here’s what to do if it happens to you.
Find out who is owed what
You may have been ignoring requests for payment because you don’t recognise the name of the organisation asking for money. There are two possible explanations. First, many organisations, such as retailers, arrange finance deals via a specialist finance company, whose name you may not have noticed when you signed up. Second, many lenders sell debts on to collection agencies, who make money by recovering what’s owed.
Often, a debt could belong to the previous owner or tenant of the property you live in, or a previous partner. You need to be sure that this is your debt – follow up on any leads given in bills or demands you’ve previously put aside and talk to the organisations concerned.
Look at your credit report
This is the personal history of your credit agreements, such as credit cards, loans and mortgages, along with your repayment record and details of any applications for credit that you’ve made in the past 12 months. If you spot any unfamiliar accounts or applications, you may be a victim of identity fraud. This is one of Britain’s fastest-growing crimes and takes place when a criminal manages to get hold of enough of your personal data to impersonate you and borrow money or buy goods and services in your name.
You can see your Experian credit report now.
Check that you don’t have joint debts
When you are going through your credit report, look up the section on financial associations – it will list anyone with whom you share a joint credit obligation. If you see the name of a former partner, it’s possible that he or she has run up debts that are in your name too – which means that you are also responsible for his or her overspending. For example, you may have a joint credit card account, loan or mortgage that weren’t cancelled when you separated. Contact the lender immediately and let Experian know as well – you can do this via CreditExpert. Unfortunately, you may be legally responsible for these debts, even if you know nothing about them. You may have to repay them in full before they can be removed from your credit report and the account can be closed.
