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How To Repair Your Credit Rating After A Protected Trust Deed

Are You Still In A Trust Deed?

Sections

 

• Section 1 – What Happens When You Get Discharged?

• Section 2 – Issues With Credit Report Accuracy

• Section 3 – Which Credit Reports To Use

• Section 4 – Your Data Protection Rights

• Section 5 – Issues With Default Notices

• Section 6 – About Credit Scores

• Section 7 – Getting A Mortgage

• Section 8 – Credit Cards

• Section 9 - The Effect Of Credit File Searches

• Section 10 – Myths About Credit Ratings And Trust Deeds

• Section 11 – Saving Your Emergency Fund

• Section 12 – Got A Question?

Section 1 – What Happens When You Get Discharged?

Your trustee will issue you with a Form 5 when you get discharged. This is your proof that you have completed your trust deed. Keep it safely; you may need it in the future.

 

Your trustee provides your Form 5 to the Accountant in Bankruptcy (AIB). This Scottish government agency administers the Register of Insolvencies. This is the official record of protected trust deeds.

 

The AIB will update your entry on this register. You can check this entry online. Look for the “Debtor Discharge Date”. If it lists a date, you’ve been discharged. Your discharge becomes official when it gets recorded on this register.

 

Your trustee may not be discharged. This doesn’t matter. You can begin to address your credit rating when you get discharged.

 

Credit reference agencies monitor official insolvency data. They should be aware of your discharge. They should update your credit file to show that this has happened. You can check this in the “public records” section of your credit report.

 

Section 2 – Issues With Credit Report Accuracy

It’s important that the entries on your credit file are accurate. Errors are common.

 

You may find credit balances still show as owing. Did your default notices get updated? Did default notices get issued after your trust deed began?

 

Your trustee is not responsible for any errors. They have no role in this. They don’t report to credit reference agencies.

 

The credit reference agency is reporting what lenders have told them.

 

Creditors hold the primary duty for correcting errors. They shouldn't report inaccurate information. Their reporting should change after your trust deed discharge. Three key areas that they should address are:

 

1. Backdating default notices issued after your trust deed began

2. Marking default notices as being “satisfied” or “partially satisfied”

3. Checking that the balance owed is set to zero

 

You may need to contact your creditors. Point out any errors and request that they get corrected.

 

You may wish to handle this via regular customer service channels. You could make complaints instead. Complaints must get dealt with in a fixed period of time. This route might be faster.

 

Section 3 – Which Credit Reports To Use

 

There are three main credit reference agencies in the UK. They are Experian, Equifax, and Callcredit.

 

The data that they hold about you may vary. You may wish to access reports from each of them. This is because different lenders use different agencies. If you apply for credit, any of the agencies could get used by the lender.

 

Each agency offers subscription services. They can be expensive. We advise against using them.

 

You can access this data for free. The following free services are available to you:

 

• Experian: https://www.moneysavingexpert.com/creditclub

• Equifax: https://www.clearscore.com/

• Callcredit: https://www.noddle.co.uk/

 

Section 4 – Your Data Protection Rights

 

Creditors might not update your credit file. This may be because they aren't yet paid. Your trustee may pay creditors several months after your discharge.

 

Payment to creditors isn't your problem (but it could cause you problems).

 

The Information Commissioner’s Office (ICO) oversees data protection law in the UK. We contacted them regarding this issue. We asked what should happen in this situation.

 

The ICO were clear in their response. The principle getting applied is that creditors should “reflect reality”. Your credit report should reflect reality.

 

You got discharged from the trust deed. You don’t owe the money any longer. Lenders should update your credit file to show this. They should mark any default notices as satisfied or partially satisfied. The balances showing should be zero.

 

You can contact the ICO if your complaint to a creditor gets rejected. They can exert pressure for you (if you have a good case). You could contact the Financial Ombudsman Service. They can also exert pressure for you.

 

Section 5 – Issues With Default Notices

 

Default notices get issued if you break the terms of a credit agreement. They are reported to the credit reference agencies. They alert other lenders who check your credit file. You get notified in writing by the lender.

 

Default notices are a one-time event. They get issued on a specific date. Your credit file shows that date.

 

They often get confused with monthly default “status reporting” on your report. This may show as a “D” on your credit report for each defaulted account. These “D” entries appear month after month. They aren't new default notices.

 

When you enter a trust deed you no longer meet your credit agreement’s terms. The lender can issue a default notice. If you were in arrears this may have happened already.

 

Default notices remain on your credit file for six years from their issue date. The account then vanishes from your credit file. Protected trust deeds also remain on your credit file for six years from the start date. Default notices damage your credit score. Lenders are wary of them.

 

A lender might issue a default notice after your trust deed began. This can cause a problem in the future. That account will remain on your credit file after your trust deed vanishes.

 

You can request that a lender backdates a default notice. It should be backdated to the date that your trust deed began. Both will disappear from your credit report at the same time.

 

A request for backdating should be made to the lender. You could use their customer service channel. You could instead make a formal complaint.

 

If a formal complaint gets rejected you can escalate the matter. You could contact the Financial Ombudsman Service. You could contact the ICO. Both have the power to tackle the default notice issuer on this matter.

 

At the end of your trust deed, lenders should update your default notices. They should get marked “Satisfied” or “Partially Satisfied”. The default notices will become less damaging at this point.

 

A “Satisfied” entry signals that your debt’s cleared. A “Partially Satisfied” entry signals a cleared debt which wasn't fully repaid). Both are acceptable entries.

 

Actions to take after discharge from your trust deed:

 

1. Obtain your three credit reports (see links above)

2. Check that any default notices got issued when your trust deed began (not after)

3. Check that any default notices get marked as satisfied or partially satisfied

4. Contact lenders to correct any errors

5. Escalate complaints that aren't resolved by the lenders

 

These actions will give you the best chance to improve your future credit status.

 

Section 6 - About Credit Scores

 

Each of the credit reference agencies gives you a credit score. Experian score you out of 999. Equifax score you out of 700. Callcredit score you out of 710.

 

These scores can seem important. People take them seriously. Following a trust deed in Scotland, you should ignore them altogether. The scores don’t mean very much.

 

The credit agency is guessing how a lender might view you. Lenders don’t use these scores. Lenders use the data in your credit file. Lenders use the data in your credit application. Lenders compare you to their model of ideal customer.

 

Lenders’ preferred customers are simply those likely to be profitable customers.

 

An example: Your credit score is poor. You apply for a bad-credit credit card. Vanquis and Aqua are two examples. The interest rate is high. The credit limit is low. You’re likely to get accepted.

 

This is because you’re likely to be profitable. They don’t think that you’re great with money. You could use the full credit balance. You could just make minimum repayments. They’ll charge you lots of interest. Even if you default in the end, they’ll probably have made money from you.

 

Another example: You apply for a £5,000 loan from a high street bank. Your credit rating is good, but they can see past problems on your credit report. The interest rate is low, so their profit margin is low. It’s a long-term loan, so the chances of default are greater. If you default in the future, they could lose thousands. You’re likely to get rejected if you apply.

 

Ignore your credit score for now. Make sure that your credit report is accurate. Make sure any credit accounts get paid on time. Don’t build-up new debt. These are the building blocks for better credit access in the future.

 

Section 7 - Getting A Mortgage After A Trust Deed

 

Getting a mortgage soon after a trust deed is going to be tough. It might be impossible. You can improve your chances of getting a mortgage in the future.

 

Since the credit crunch (2007) mortgage lending has been restricted. Lender appetite for risk is low, though it’s improving. A trust deed in the past gets seen by the lender as a real risk-factor.

 

Knowing the mortgage lender perception of risk is helpful. You could call this “thinking like a lender”.

 

Mortgage lenders and borrowers took too many risks before the financial crash. These risks were:

 

• High loan-to-value lending. A mortgage lender offering a 95% or 100% mortgage takes a big risk. They’re exposed to losses if property prices fall.

 

• Low borrower deposits. A borrower with a low deposit has little to lose. The risk of default is higher. The borrower has less to fight for.

 

• Affordability problems. A large mortgage could push you into financial difficulty. You might borrow on credit cards to manage your bills.

 

• Bad credit history. Previous borrowing is used to predict future payment. Lenders took little account of risks posed by poor credit histories in the past. They do now.

 

These factors inform current lending rules and policies. They show you how to improve your chances of getting a mortgage. Save the biggest deposit that you can. Be realistic regarding the price of a property that you can buy. Improve your credit history. Allow time to pass.

 

Time is a major factor. We know of no mortgage lenders providing a mortgage within one year of discharge. We hear of a couple of credit unions that will lend after a year. Other mortgage lenders might have no interest until two (or more) years have passed.

 

Independent mortgage brokers are your friend here. You might visit high street banks and meet with their mortgage adviser. You’ll probably be wasting your time. They’re especially risk averse.

 

There are many mortgage lenders that aren’t on your high street. You’ve won't have heard of most of them. Independent mortgage brokers know them. They can be flexible and willing to accept more risk. They have mortgage products designed for people with imperfect credit histories.

 

We suggest that you find an independent mortgage broker based locally to you. Get a friend to recommend one if you can. Go through your needs and situation with them face-to-face. Some mortgage brokers will check the market for you without charging a fee.

 

Tell them everything. Hiding a previous trust deed will cause problems later.

 

Some action points:

 

1. Save the largest deposit possible. This may take effort, time, and lifestyle sacrifices. Can you save your former trust deed payment every month?

 

2. Review your credit reports after your trust deed. Take action on any errors you find.

 

3. Build some positive credit history. Make modest responsible use of credit. Don’t build new debt balances. Pay everything on time.

 

4. Avoid new financial commitments. The mortgage lender needs to know that you can afford the new mortgage. Credit card balances, or car finance agreements, are commitments. They will reduce the amount that you can afford to borrow.

 

5. Allow time. The longer you’ve been discharged, the better your chances of getting a mortgage. Use that time to work on the four items above.

 

Section 8 - Credit Cards After Your Trust Deed

 

Credit cards can be useful. If you travel, they allow you to access hotels and car hire. If you have work expenses, they give you time to claim them back. They can add protection for online purchases.

 

Credit cards can enable you to demonstrate responsible borrowing. This may improve your credit score. Small regular purchases, repaid in full each month, are the best way to do this.

 

They’re a risky type of debt for you. The interest rates can be high. Credit limits get increased. The minimum repayments clear little of the debt. These debts can take a long time to repay.

 

These risks are a profitable for lenders. If you build a long-term credit card debt, a lot of interest gets charged. You’ll pay a lot of interest for a long time. This is why providers like Vanquis or Aqua offer cards right after trust deeds.

 

Getting a credit card presents you with benefits and risks. Think carefully before acquiring one.

 

As your credit rating improves, get rid of any bad-credit high-interest cards. Acquire a mainstream credit card instead. This will help to build your credit status in the future. It may also save you money.

 

Section 9 – The Effect Of Credit File Searches

 

What is a credit file search? They’re recorded on your credit file if a firm looks at it. They’ll check your file if you make a credit application. The name of the searching firm gets recorded. They may stay on your file for two years. The success of your application isn't recorded there.

 

Searches may get recorded if a firm checks your identity. They’re common if applying for insurance. A search may get recorded if you check your own file.

 

It’s said that searches will affect your credit score. This is generally untrue.

 

Making a lot of credit applications might cause a problem. Lenders may view this as a risk. You might be a victim of fraud. You might be applying for more credit than you can afford to repay. The lender may choose to avoid these risks by refusing to lend to you.

 

If looking for credit, write a shortlist of products you like first. Apply only for these. This will restrict the number of searches recorded on your file.

 

Are you getting refused credit? It might be best to work on your credit file and credit rating. Is your report accurate? Get any errors corrected before applying for credit again.

 

Section 10 – Myths About Credit Ratings And Trust Deeds

 

Will I get blacklisted for credit? There simply is no blacklist. A trust deed cannot put you on one.

 

Will my address get blacklisted? There is no address blacklist. Lenders search for you by using your address. This doesn’t affect others who live in the same property.

 

Will my family or partner get affected? Addresses aren’t blacklisted, so your relatives aren’t affected. There is an exception. You may have a “financial association” with a partner or relative. This happens if you have a joint financial account. Examples are a joint mortgage or bank account. This association gets marked on your credit file. Your partner or relative’s credit score isn't affected. However a lender may be less willing to lend to them.

 

Will lenders reject me if they see that other applications failed? Lenders cannot see whether a previous credit application was successful. Too many searches on your credit report could cause a concern.

 

Can a credit repair firm help me? They cannot remove truthful records from your credit report. For example they cannot remove the record of your trust deed. They could help you to clear errors on your credit report. This is also work that you can do yourself.

 

Section 11 - Saving Your Emergency Fund

 

Credit has two positive uses:

 

It can help people to buy expensive items. Homes and vehicles are the two main examples.

 

It can also help people to complete smaller purchases sooner. This is useful if the cost of borrowing is reasonable. It can spread surprise costs like car repairs.

 

Credit becomes a negative if costs spiral. This happens if interest rates are high. It happens if debts get paid back slowly (or get replaced). It also happens if the repayments aren’t affordable.

 

Few people can avoid credit for major purchases like a house or car.

 

Dealing with emergencies is different. If you save an emergency fund, you may never need emergency credit. Emergency credit can be expensive.

 

You’ve completed your trust deed. Could you start saving away your old trust deed payment? Or part of it? You’ll create a decent emergency fund. Your reliance on credit will reduce. You’ll save money in the future.

 

Section 12 – Got A Question?

 

Please register for our forum and ask your question there.

 

We regret that our internal debt advice team cannot respond to direct enquiries on this subject.

 

Author: Andrew Graveson

Qualified Debt Adviser & Trust-Deed.co.uk Founder

 

Page last updated: 25/02/2019

 

 

(c) Channel Active Limited. Company Number: 06412452. Data Protection Registration: Z1332750.

Telephone calls may be monitored or recorded. Authorised and regulated by the Financial Conduct Authority.

Trust-Deed.co.uk, Clyde Offices, 2nd Floor, 48 West George Street, Glasgow, G2 1BP. Tel: 0141 2490416.

 

(c) Channel Active Limited. Company Number: 06412452. Data Protection Registration: Z1332750.

Telephone calls may be monitored or recorded. Authorised and regulated by the Financial Conduct Authority.

Trust-Deed.co.uk, Clyde Offices, 2nd Floor, 48 West George Street, Glasgow, G2 1BP. Tel: 0141 2490416.