How Trust Deeds In Scotland Affect Your Credit Rating
In this article we explain some of the way your credit rating may be affected if you enter into a formal debt solution, such as a Scottish protected trust deed. We also explain the consequences, and what steps you can take in the future to improve your credit status again.
There’s plenty of myths and nonsense that do the rounds about credit reports. We’re not touching on them in this article, but you can read more about them here.
A Formal Insolvency Procedure
A protected trust deed is a formal insolvency procedure and legal agreement. If you enter into a trust deed, your personal details will be recorded on the Register of Insolvencies until one year after your trustee has been discharged.
This public information will also be documented in your credit file, usually in a section entitled “public information records” or something fairly similar. Any bankruptcies or court judgments can also be found in this section. This information will remain visible on your credit file for a total period of six years.
Lenders may impose criteria that restrict credit availability altogether, or make it more expensive, for individuals that have been insolvent within the past six years.
Six years after entering a trust deed, this entry will no longer be present on your credit file.
Missed Payments And Late Payments
When you initially decide to proceed with a debt solution, a point in time will come at which you cease paying your creditors directly.
There may still be some time remaining at this stage before your new debt solution is formally in place.
During this period, your creditors are likely to record missed payments and arrears on your credit file. These entries, like anything else on your credit file, can remain present for six years from the point at which they were issued.
Default notices are usually issued by lenders when people fall substantially behind on their contractual repayments. They’re sometimes a precursor to legal action or to the sale of a debt.
If you enter a Scottish trust deed your creditors should issue default notices no later than the start date of your insolvency. These entries, like the public information record about your trust deed, should vanish from your credit file six years after they’re issued.
Creditors should also mark your default notices as being “satisfied” or “partially satisfied” once you have been discharged from your trust deed.
Lenders aren’t always especially good at timing default notices properly or updating them once people have finished their protected trust deed. This article suggests ways to correct this problem.
A Lack Of Credit Activity
Prior to being discharged, it’s not sensible (though not disallowed either) to access further unsecured credit. Not using credit may affect your credit rating, as potential lenders will have no recent repayment history to assess lending decisions against.
Some people might be less affected by this is they have a mortgage lender or mobile phone contract which is reporting to the credit reference agencies.
Some people also take out a high-interest credit card soon after they’ve been discharged with a view to creating some positive recent credit history. This comes with some risks however, and will not be the right choice for everyone.
Future Access To Mortgages
At the time of writing, accessing a mortgage is tough for anyone with an impaired credit rating. If you’re currently in a trust deed, it’s likely to be impossible to get a new mortgage at all right now.
Once you’ve been discharged, your prospects will steadily improve over time. A key point in time might well be the six year stage, at which point your previous insolvency is no longer present on your credit file.
We’ve written a specific guide with more information and tips about accessing mortgages after a trust deed.
Rebuilding Your Credit Rating After Discharge
There is much you can do to improve your credit rating and general financial wellbeing in the future.
Ensuring creditors update your file after being discharged, and making some positive use of credit again, will help to improve your creditworthiness. This process may accelerate once the insolvency details have been removed from your credit file altogether.
To start this process you’ll need to get hold of a copy of your credit report. This page provides some suggestions about the cheapest and best ways to do access this information.
Got A Question?
Our forum is used regularly by visitors with questions about how their credit rating will be affected before, during, and after using Scottish trust deeds.
Please add your questions; you’ll receive answers from experts and from people who have dealt with the same issues in the past.
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