How to survive the credit crunch

Search: Improve your credit rating

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

Britain's personal debt on cards, mortgages and loans now exceeds the entire value of the economy for the first time, recent figures show. And the effect of a nation creaking with debt is has been felt by the banks as the credit crunch rips into their profits and ability to do business.

Alongside this, dismal predictions that at least 8.6 million Britons will be routinely refused credit by mainstream lenders by 2011 have emerged from a report by analysts Datamonitor - but there is no need to panic.

There are simple steps you can take to protect and even improve your credit status and stop yourself from being pushed over the financial edge.

Build a better credit history

Improving your credit rating improves your chances of getting the deals you want. For example, you could pay off one credit card entirely or roll up several debts into a single, more cost-effective loan. One simple step is to register to vote. Here are a number of ways you can ensure that if the credit crunch hits you, you're prepared:

Register to vote

Lenders look up the electoral register whenever you apply, to check that you are who you say you are and live where you say you do. If you don't appear at your current address, they could mark your credit score down or even refuse your application outright.

Check your credit report carefully

Ensure it's up to date and accurately reflects your circumstances, even a simple clerical error could damage your credit rating. If you disagree with anything, contact the source of the information, such as a lender or court, and ask them to change it. Be prepared to provide proof.

Explain problems

You may also be able to add an explanation to an individual entry on your credit report, explaining the circumstances that led to a problem.

Don't go bankrupt!

There is no quick fix for debt. A bankruptcy or its cousin, the Individual Voluntary Arrangement, may seem an attractive escape route but they will taint your credit history for many years.

If you think insolvency might be a sensible way of dealing with your debts, make sure you seek expert, impartial advice first. Information about both of these options stays on your credit report for at least six years, even after they've been discharged or completed. Lenders are less likely to grant you credit as they will view you as a higher risk.

Get expert advice

If you're worried about how to cope, get free, expert advice from one of these organisations:

• Citizens Advice - www.citizensadvice.org.uk
• The Consumer Credit Counselling Service - www.ccs.co.uk
• National Debtline - www.nationaldebtline.co.uk
• See your free Experian credit report with a 30-day trial of CreditExpert here.

Here's an 8-step checklist to help you weather the credit storm.

1. Shop around for the best prices on all your financial products, such as loans, mortgages, credit cards, mobile phones, insurance policies and utilities.

2. Consider managing your accounts online and paying by direct debt as this will often save you money.

3. If you are struggling with your mortgage payments, speak to your mortgage lender as soon as possible. You might also consider re-mortgaging if there are better deals available.

4. Create a budget for yourself and stick to it, but be realistic!