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Surviving the credit crunch

Beat the January financial blues

Search: Improve your credit rating

- Check your credit hasn't been tampered with
- Tips on avoiding identity theft

If you don't like Mondays, you must really hate Monday 21st January. It's officially been named Blue Monday by a psychologist and former tutor at Cardiff University, who has used a mathematical formula to prove that it's the most depressing day of the year.

Dr Cliff Arnalls cites foul weather and failed New Year resolutions as major contributors to this state of affairs. But high on his list of factors are debts built up over Christmas, the arrival of the bills for the season of goodwill - and anticipation of a pay packet that may well be too small to cover them.

Dr Arnalls believes that the guilty feeling we should be doing something to put things right is another contributor to this malaise - so this year, why not take control of your finances instead of splitting up with your partner, indulging in retail therapy or slamming doors?

Take these ten steps and you'll soon be feeling better:

1. Discover your real position

Getting to grips with your financial position is the first step towards improving it. A good place to start is your credit report. This is the history of credit you have, such as credit cards, loans and mortgages, plus your repayment record, including any court judgments against you.

It shows your current position and how well you are coping - and it can act as a wake-up call if you've been trying to hide from your debts. Equally, you might find you're not as badly-off as you think. You can get a free copy of your credit report online, here.

2. Get organised

Check all your statements - bank account, savings, credit cards, loans and utility bills - so you can see where your money is going. Make sure every month that there are no double or missed payments and that you pay your bills on time, or you could rack up penalties and damage your credit history.

3. Set a target

You may not be in a good place at the moment, but where do you want to get to? Be realistic - the odds are 14 million to one against winning the lottery jackpot. A more practical target would be to reduce the amount you owe on your credit cards or to save for the deposit on a new home. Review your plan every month to see how well you are doing.

4. Save on living expenses

You can save a lot by changing your day-to-day habits. For example, a £1.50 latte every working day costs around £400 a year and home-cooked meals are a fraction of the price of take-aways. Set aside some of the money you save for a treat, such as a holiday - that way, you won't feel deprived.

With energy prices on the rise this year, it's also worth visiting a price comparison site which matches your profile to available offers. While you're there, check out telephone and insurance offers, too.

5. Clean up your credit history

During the current credit crunch, it's more important than usual to have a good credit report - lenders check it whenever you apply to them and a history of missed repayments or a mountain of unmanageable debt won't impress them.

So make sure your credit report is up to date and accurately reflects your circumstances. Query anything you disagree with and ask to add a note of explanation if exceptional circumstances, such as illness or an accident, got you into temporary trouble.

6. Reassess your borrowing

There are good deals out there. It's a matter of tracking them down and persuading lenders that you are responsible and reliable. If you have trouble remembering to make repayments, it's worth setting up direct debits. Or you may want to consider rolling up several debts into a single loan that will be cheaper or simpler to manage. In every case, remember to factor in any penalty or set-up fees if you decide to switch - they can make the difference between saving and losing money.

7. Don't leave footprints

When you do your research, be sure that lenders understand you only want information and aren't making a full application. The reason is simple - every application triggers a search of your credit report that leaves a track, known as a footprint. Other lenders will see these in future and may think you're desperate for cash or even suspect a fraud. That won't do your chances any good.

8. Keep your ID safe

ID fraud costs Britain billions every year, so protect yourself from the fraudsters who could impersonate you to run up huge debts and damage your credit history.

Shredding sensitive documents before throwing them away, forwarding your post when you move and never giving personal information to cold-callers or e-mailers are all sensible precautions you should be taking to safeguard your identity. For more tips, go to www.stop-idfraud.co.uk.

Top of the list is monitoring your credit report, which proves such an effective protection that it's recommended by the government. Regular checks mean you quickly spot any unfamiliar credit accounts or applications and can stop real damage occurring. With a free trial of CreditExpert, you'll also be alerted by e-mail or text whenever there's a change to your credit report that could indicate an attempted ID fraud.

9. Declare your independence

More couples break up in January than any other month. If the worst has happened, you need to separate your finances as well as your possessions. Tell banks, building societies, credit card issuers, mortgage lenders and utility providers if you no longer share a financial connection - your credit report includes contact details. Then set up new accounts.

You should also make sure that your credit report no longer registers the two of you as financial associates. That's important because lenders may look at the credit history of anyone with whom you share a credit account, and if your ex gets into trouble, you could face rejections or be asked to pay higher interest.

10. Keep up the good work

Sorting out your finances is one resolution that's easy to keep - you can see yourself getting better off and watch your credit status improving every month. You might even be able to afford an indulgent Christmas by the end of the year, and face an even happier 2009.

To view your personal credit information that lenders are currently basing their credit decisions on, apply now for a free online credit report. Click here for a free 30-day trial and a free copy of your Experian credit report

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