One of the biggest downsides for many people considering entering into a Protected Trust Deed, or any other formal Scottish debt solution, is the impact on their credit score.
You may typically be in a Protected Trust Deed for a period of 48 months but you will find that for a further 24 months at least, your credit rating is substantially worse than when you were at the peak of your borrowing.
However, if you continued to do nothing about your debts, missed contractual repayments and defaulted on your payments, then this in itself would have a severe impact on your credit rating too.
Your credit score, lifestyle and needs are taken into consideration while working out which solution may be best for you if you do have unaffordable debt.
Ultimately, you are responsible for your own decision and should you approach a company looking for debt help, together you will go through the advantages and disadvantages of each solution and how it may impact you.
The process for cleaning your credit rating after a Protected Trust Deed is largely the same as if you were Sequestrated (made bankrupt) or completed a Debt Payment Programme (DPP) as part of the Debt Arrangement Scheme (DAS).
In theory, you shouldn’t need to do anything to improve your credit score after a Trust Deed, as it should disappear from your credit rating but sometimes work is required to expedite the process.
The detail and dates may vary for Sequestration and Debt Arrangement Scheme, depending on how long you are in the solution. e.g. MAP Sequestration, you may be discharged earlier than you would in a Trust Deed, or with DAS. you may still be making payment contributions for longer than the six year period.
The following guide relates to Protected Trust Deeds more specifically, but you can also view our guide: Improving your credit score after repaying debt under the Debt Arrangement Scheme.
How Protected Trust Deeds should show on your credit record
What should happen after a few months?
- The Trust Deed shows in the Public Record section of your credit record. It can take a few weeks for the entry to appear
- All debts in your Trust Deed should be marked as defaulted
The default date for every debt included in your Trust Deed should be the date your Trust Deed started or earlier
- There will be no change for any Decrees ( CCJs in Scotland) even though they are in your Trust Deed
- There will be no change for any debts, such as your mortgage, which do not form part of your Trust Deed.
When your Trust Deed term ends and you have received a ‘Letter of Discharge’ the changes to your credit file depend on whether this is less than six years after the date your Trust Deed started or more than 6 years. With a typical Trust Deed case lasting 48 months, in most cases, you will receive the letter well in advance of the 72 month term.
If you have the fortune of being able to pay off your debts in full, even before the term of your Trust Deed has concluded, your credit file will still show an active Trust Deed mark.
All debts that you included in the Trust Deed should have their balance owed set to zero. The Information Commission Office (ICO) says that the debts should be marked “to show that you no longer owe money on that account (perhaps by marking the entry as ‘partially satisfied’ or ‘partially settled’ or in some other way).”
How this is reported depends on what credit report system you are viewing, however in practice, it shouldn’t matter providing the balance owed is zero.
Decrees in your Trust Deed will not be changed – they cannot be marked as ‘partially satisfied’ – barring the unlikely event where you have repaid 100p in the £ to all your debts included in the Decree debt(s).
If all the above has happened correctly, after six years everything vanishes and your credit rating will improve substantially.
Correcting problems with your credit score after you have finished your Trust Deed term
Depending on the creditors you have, you may need to check that your credit records with all the Credit Reference Agencies because the creditors only tend to report to one of them.
While we often refer to our credit score as a single entity, the reality is that in the UK we have three credit scores as we have three main Credit Reference Agencies in the UK:
Each Credit Reference Agencies (CRA) has a record of your data that has been sent to them by your lenders. Most lenders typically report to one of the three CRAs, however, some may report to all three.
Your credit report with Equifax can look very different to your Experian file. This doesn’t mean however that you have a better credit rating on one over the other, they are reporting on different information from different lenders.
Should you encounter one of the problems below, you shall need to contact your creditors directly, as the agency will forward any complaint directly onto them and not take an active involvement in the correction of the information held about you, as frustrating as that sounds.
When it comes to complaining to your lender about an error in your credit report, you should always complain in writing. This will help ensure that there is a paper trail of the logged complaint, but also consider that whoever you speak to, in branch or at call centre level, may not always know what a Trust Deed is, or for that matter any other formal Scottish debt solutions including the Debt Arrangement Scheme.
Find information on the Data Controller from the ICO website and send the following letter to your creditor, recorded delivery. Make sure you keep a copy of the letters you send and get proof of postage.
This may seem a bit troublesome and intimidating in itself, but while most problems can and will be resolved amicably, this will help you ensure your case is sorted to your satisfaction.
Generally, you should wait 6 months after the Trust Deed begins to start this process. There is no rush at this stage since you have several months and years to go.
Re: [account/reference xxxxxxxxxxxxxxx]
I started an Protected Trust Deed (PTD) on dd/mm/yyyy.
You can confirm this by checking the Register of Insolvencies at https://roi.aib.gov.uk/roi/PublicSearches/PublicSearch
I am writing to ask you to correct my credit file for [details of your debt with the creditor, including the account number or reference number].
This debt is included in my Protected Trust Deed.
At the moment [there is no default date shown / the default date is shown as dd/mm/yyyy].
This is incorrect and a breach of the Information Commissioner’s Office guidelines and the Data Protection Act 1998.
There should be a default date not later than the start date of my Protected Trust Deed.
Please correct this entry within 28 days or supply me with a written reason why you will not do so.
If the creditor replies saying that they don’t know anything about the Trust Deed, inform your Insolvency Practitioner.
Where a creditor has knowledge of your Protected Trust Deed but refuses to add, or correct the default date, complain to the Financial Ombudsman. Attach copies to the creditor, the proof of posting and any reply that you’ve had from the creditor in question.
If your creditor doesn’t mark your balance as zero after Trust Deed is completed
If the default date for the debt is on/before the date your Trust Deed started, as would typically be the case, the debt is going to disappear from your credit record six years after that date.
Where there is a lag of a few months, you may decide to correct this immediately or be content that your credit score will naturally correct itself in the same period.
However, if you do want this correctly sooner, send the below letter to your creditor. Again, by recorded delivery and getting proof of delivery, and keeping a copy of the letter that you send.
Re: [account/reference xxxxxxxxxxxxxxx]
I completed my Protected Trust Deed on dd/mm/yyyy. I attach a copy of my Letter of Discharge.
I am writing to ask you to correct my credit file for the above debt which was included in my Protected Trust Deed.
The Information Commissioner’s Office guidelines state that my credit file should show that I no longer owe money on that account, perhaps by marking the entry as ‘partially satisfied’ or ‘partially settled’ or in some other way.
Please correct this entry within 28 days or supply me with a written reason why you will not do so.
Again, if the entry is not corrected, complain to the Financial Ombudsman.
Please note that your creditor is not obliged to mark your debt as fully settled/satisfied so partially settled/satisfied is more realistically the best you will be able to achieve by taking this action.
Decrees are not amended
The sheriff court only has to mark a Decree as satisfied if you have paid it in full, which you haven’t done so.
A decree will remain on your credit record with a balance showing and can’t be changed.
Is all this worth doing?
It is worth correcting the dates of default unless they are only a few weeks late.
If default dates are late or missing, they delay the time until your credit file is clean as those debts will remain for six years after the default date.
Depending on your lifestyle and aspirations, you may decide to apply for a mortgage or move to a new property after the Trust Deed term has ended. In which case, it is essential that your credit record is corrected and improved upon as quickly as possible.
On the otherhand, having endured an extended period of financial difficulties, resulting in the need to seek help, it’s easy to understand why you would be less inclined to be deemed creditworthy again so soon after finally being able to declare yourself free from debt.
Getting the balances set to zero after you get your Letter of Discharge is less important. Even if you get this amended, most applications for credit are likely to be refused whilst the Protected Trust Deed remains on your credit file. If you are close to the six-year drop-off, then you could decide to wait and let that clean everything up.
However, if the balances are all zero, although this doesn’t improve your credit score at all, it may be enough for you to be approved for a ‘Poor Credit / Bad Credit’ card, see below.
A zero balance also prevents the debt from being ‘sold on’ to another Debt Collector, which will result in you having to correspond with another third party and having to send them details of your Trust Deed.
Getting positive markers on your post-Trust Deed credit score
You should aim to start rebuilding your credit score after the Trust Deed ends. You should aim to start acquiring new, positive credit marks after your Trust Deed has finished. If you don’t, when your credit record becomes clean, it is also has nothing showing.
By following the steps above, you are dealing with the cleanup process of your old debts.
1. Electoral Roll
Make sure you are on the electoral roll. and that your address and any other details are correct with the Credit Reference Agencies.
This is important as lenders use the electoral register as an indicator that you live where you say you do, helping to prevent fraud. This step of being able to verify your identity will in itself have a positive impact on your credit score.
2. Poor (Bad) Credit Card
There are a number of poor (bad) credit card companies known as Vanquis, Aqua and Luma. You may be familiar with these brands already, generally, you should avoid reapplying for a credit card with one of these lenders, if they were included in your Protected Trust Deed as a creditor.
You may still be refused credit by one of these companies, however, ensure your credit score is clean with all three Credit Reference Agencies and, wait another few months and then apply for another poor (bad) credit card.
Always be mindful of your affordability and avoid getting back into a situation where you have problem debt once again. Consider that in order to be accepted for a poor (bad) credit card, you will be more risk to that company, and the rates they charge will not be as favourable.
These cards can be dangerous. Over 4 million people across the UK have a credit card in this category, which can also be marketed as sub-prime credit cards, credit-builder cards or second chance cards. Research from the Financial Conduct Authority, the body responsible for regulating the credit card industry also found that as many as 25% may default on their poor (bad) credit card within one year, or as reported by Stepchange, many people also use these cards with a typical APR% of 34.9%-69.9%.
Therefore, only use a credit card well and your credit score goes up because as recent times have shown, we can never predict a sudden change of circumstances beyond our control. indeed this is something that you most likely experienced before you applied for your Protected Trust Deed originally.
To get the biggest boost to your score:
- Use the card once a month for something that is less than a quarter of your credit limit, such as a tank of petrol.
- Set the card to repay the full balance every month by direct debit.
- Know when the direct debit is collected and make sure there is the money in your account for it.
- Most lenders let you change the date, just after you are paid is often best.
This is the best way to maximise your credit score – using the card, but never too much and never running a balance.
Your credit rating will not improve if you leave a balance on the card
Your credit score is maximised by using the card every month for small transactions, closely monitored by yourself and repaying the card in full every month.
3. Save with LOQBOX
LOQBOX is a tool designed to help rebuild your credit score with the aim of giving you access to more lenders, and ultimately better rates. LOQBOX works by reporting your monthly savings, (which it classes as a loan) to the Credit Reference Agencies.
LOQBOX is not a loan, it’s a ‘cash redeemable savings voucher’ where you essentially use finance to purchase a voucher, which in turn is viewed by the CRA’s as a loan.
This lets you save money every month for a year and reports this to the Credit Reference Agencies as a loan you are repaying, so your credit score improves and is less of a risk than walking the tightrope of taking on bad credit cards and falling behind again.
However, LOQBOX is not risk-free either. If you do miss one of your payments, this will be reported to the CRAs and will have a detrimental impact on your credit score. It is possible to avoid this by immediately quitting, which may still affect your credit score but with a lesser consequence.
LOQBOX is not without cost either, you will typically have to open an account with one of their suggested saving accounts, for which they receive a commission from their partner and should you wish to avoid this and have the money paid into your own account; you’ll have to pay a £30 fee.
When all your Trust Deed debts go, there is then this simple loan which you have repaid on time so your credit score is good. Find out more about how LOQBOX works.
Rebuilding a credit rating takes time
If you were expecting the end of your Protected Trust Deed to make an immediate improvement to your credit score, it usually doesn’t, unless it is after the six year point and there isn’t a way to speed this up.
Firms selling a ‘repair your credit’ service either don’t work at all, or they will be no better than what you can do yourself using the letters here.