Debt is an issue that can affect anyone, even the rich and famous. We’ve compiled a list of some well-known celebs that you might be surprised to learn have experienced financial difficulties.
• Shane Ritchie: East Enders star Richie is a household name in the UK after a lengthy career in show business. However, Ritchie’s extravagant lifestyle landed him firmly in the red. The star had to turn to friends and to help keep up £8,000 monthly mortgage repayments for his £2 million home and avoid bankruptcy.
• Mike Tyson: Fearsome Mike Tyson’s professional boxing career pocketed him a staggering £165 million. At the peak of his career, Tyson splashed out on a number of mansions and an impressive collection of cars. However, back in 2003, the courts declared the ex-boxer bankrupt, owing in excess of £70 million.
• Kerry Katona: The former Atomic Kitten and recent reality TV star Katona has long had her exploits reported in the press. In 2009 she declared herself bankrupt due top unpaid tax bills. Her hit and miss career did not earn her enough for her extremely lavish spending habits, pushing her further into the red. She was reported to spend £1.5 million on a luxury home and nearly £300,000 on a collection of cars and motorbikes.
• Joe Swash: The second East Ender to make our list is Joe Swash. The TV personality was reported as failing to pay a £20,000 tax bill and was declared bankruptcy. Extravagant lifestyle outweighed his less than modest earnings, showing again that the rich and famous don’t always live within their means.
• M.C Hammer: Stanley Burrell, more commonly known as M.C Hammer reached the dizzy heights of stardom in 1990 with his super hit ‘U Can’t Touch This’. However, the rap star was pronounced bankrupt by the courts due to his over-spending on multi-million dollar mansions and a fleet of luxurious cars.
It has been reported that as many as 8 out of 10 people in debt, claim that the situation is having serious implications on their lives, in terms of the relationships with people around them, ability to concentrate at work and general wellbeing. Many people see debt as a shameful position to be in and as such keep their problems to themselves. With no outlet for the worry and frustration associated with debt, people become vulnerable to mental and physical illnesses.
Debt is often at the forefront of many people’s minds, and the stress and anxiety will often find prohibit usual sleeping patterns. Sleep deprivation can cause problems with both physical and mental health. It’s common for anxiety to cause irritability, shortness of breath, tightness of the chest and dizziness.
It’s not just the knowing that you are in a bad financial situation, the constant calls and threat of legal action just worsen the situation. According to the Consumer Credit Counselling Service (CCCS), 37% of their clients claimed that debt had caused adverse affects on relationships with partners, whilst 22% claimed that relationships with their children had been affected.
It needn’t come to this. The first action is to admit that there is a problem. It is vital that you share your situation with others around you. Debt is an issue that affects a large proportion of the UK population and nobody in that situation should ever feel they should deal with it alone. There are plenty of resources out there to help and give advice.
Our credit rating is something that will undoubtedly affect our financial statuses. From getting a credit card, to the interest you can expect to pay on a loan, to being able to buy a car or even a house – much of it will come down to that rating. Yet despite the large role that credit reference agencies and credit scoring in general play when it comes to our finances, there are some whopping great myths floating around about the whole process!
1. The Credit Blacklist
You’ve probably heard people saying they couldn’t get credit because they’re “blacklisted.” This might well summon up images of a giant database of names of people who should simply be refused when applying for anything financial but… guess what? It doesn’t exist. There’s no such thing as a credit blacklist. Whether you’re the perfect financial track record or you’ve recently been made bankrupt, you won’t be on any such list. Credit reference agencies keep a record of your financial past and any poor repayment history or similar problems will indeed appear – but they certainly won’t result in you being added to any sort of central blacklist!
2. Previous Tenants Ruined Your Credit!
Yes, this is another myth. In much the same way that there is no blacklist for people, there is no blacklist for households or addresses either. Think about it – the banks and lenders want to lend to reliable borrowers. It’s profitable for them to do so. In ruling out an entire household because of the poor financial track record of someone they don’t even know know who just happened to live at their address before them makes no sense. Your credit score is based on your financial history. It is unaffected by the financial history of anybody who lived at an address before you.
3. Checking Your Rating Will Leave a Black Mark
This is another myth. Checking your rating won’t leave any sort of negative mark on your record. Quite the contrary – it is in fact perfectly sensible to keep an eye on your credit rating and make sure you agree that everything kept on file about you is accurate! On the other hand, if you make repeated applications for loans in quick succession and from a number of different lenders, this could indeed leave negative marks!
4. The Credit Agencies Decide If You Get Credit
Nope! It’s the lenders who have the say about whether or not they lend to you. All the credit agencies do is supply them with the data they have on file about you. After that, it’s totally at the discretion of the lender as to whether or not they believe you reliable enough to repay any money you borrow.
Of course, if you have a particularly bad credit rating with a history of regularly missing payments and failing to repay at all, then you’re likely to be turned down. But that’s not at the say so of the credit agency – it’s simply a decision made by the lender based on the information held about you.
5. You Can’t Fix Bad Credit
Another myth. Although information about poor repayments or even bankruptcy etc stays on file for a while (often 6 years), it is possible to begin rebuilding a bad credit record. A mobile phone cnotract or small credit card paid on time every single month can show on your record in a positive light and over time you can actually completely turn around your credit rating.
Don’t be tempted, however, by people who tell you they can fix your record over night! There’s nothing to suggest that this can be done legitimately if your record is accurate. If, however, your record is inaccurate, you are within your right to contest the information held about you!
Credit scores are "everything" that matters for people who are trying to secure a personal loan, it has been suggested.
Richard Brown, chief executive of moneynet.co.uk, is convince that money lenders are currently only concerned with a person’s credit history when they assess them for a new arrangement.
By demonstrating an ability to pay money back regularly, would-be borrowers can help themselves, but lenders are currently "very nervous" and reluctant to lend to anyone who presents a risk.
The reason for this is that both borrowers and lenders have been experiencing serious debt problems in recent months, Mr Brown explains.
He said: “At the moment, lenders are only really lending money to people who are demonstrating that they can repay it.
"You need to really address your credit score because everything is governed by the credit score."
According to Credit Action, the typical British household pays out almost £3,790 annually to service the interest on their debt management burden.
Debt has become a normal part of many Britons’ lifestyles, an expert has warned.
Anna Sofat, director of money management firm ADDIDI Wealth, suggested that in the past, people have allowed themselves to fall into high levels of debt, hoping that interest rates would remain low enough for repayment to be relatively painless.
Now, however, the credit crunch has pushed up the cost of borrowing and the availability of credit, causing difficulties for people who hoped to refinance their outstanding borrowing, she continued.
"We’ve been living on perhaps a large percentage of debt and we have something of a lifestyle, to some extent, of debt and that can’t be cheated for ever and a day," Ms Sofat added.
A recent survey by Citizens Advice revealed that record numbers of Britons are seeking help with their debt issues and an increased number are struggling to pay their essential household bills and mortgage repayments.
Those who find that debt problems have damaged their credit rating could find it may affect future job applications, claimed Equifax.
The credit checking service commented on the impact of credit history when applying for certain jobs, which could affect those looking to relieve debt issues.
External affairs director at Equifax Neil Munroe said: "If you’re going into a position where there’s finance involved, it would probably seem appropriate that the employer checks your credit history."
Mr Munroe added that it was important that students checked their credit record on leaving education, both in order to check for mistakes and to remedy bad credit as they enter employment.
A survey amongst NUS members by Equifax revealed that 22 per cent of students do not know how much they have spent each month until they get monthly statements from their bank or credit card company.
The research also showed that students leaving university in 2010 could expect to be carrying around £30,000 of debt.
The recent events in the global credit market will make it increasingly difficult for those on lower incomes to gain mortgages, an expert has said.
A spokesperson for the money education charity Credit Action has warned there is "no doubt" the "less well off" will find it harder to borrow money generally.
She expressed concern borrowers would have to turn to more expensive lenders and pay higher rates of interest.
The spokesperson added many would turn to "door step lenders", where the agents go to people’s homes to collect repayments, but she added these were expensive.
One of the major providers of home collected credit is Provident Personal Credit and their website lists typical annual percentage rate on one loan as 183.2 per cent.
Credit Action warns Britain’s personal debt increases by £1 million every four minutes. It reports that each day banks and building societies will hand out £1 billion in mortgages while 77 properties will be repossessed.
