Often we speak with clients who are struggling financially to make the minimum payments and are reluctant to enter into a plan which will negatively affect their credit rating. Our advice is to think long term regarding this rather than short term. The feedback from clients is that they think that by entering into a Trust Deed it will ruin their credit rating for the rest of their lives. This isn’t actually the case.
If you are financially struggling now to repay your debts it may only be a matter of time before you miss a payment to a credit card, loan, pay day loan or catalogue. Once this happens it will start to have a negative impact on your credit report which can last for a substantial amount of time.
Being proactive in dealing with debts can mean that you limit the impact it has on your credit rating.
How long is my credit rating affected if I enter a Trust Deed?
When you enter a Trust Deed an official default notice is normally placed by a creditor on your credit file. From the date of the default notice it will remain on your credit file for a period of 6 years after which it will fall off.
Can I do anything to improve my credit file whilst in a Trust Deed?
You will need to wait until you have received your official discharge from your Trust Deed to begin rebuilding and repairing your credit file. Once you are discharged you are now no longer legally liable for the debts. At this point your creditors should update your credit file but unfortunately they don’t always do this. If they don’t you will need to write to them with a copy of your discharge certificate and request that they update your credit file.
You also want to ensure that any official default is dated as close to the start of your Trust Deed as possible. This will ensure that the default date falls off of your credit file after 6 years.
As you approach the end of your Trust Deed our team will provide you with advice and assistance on this.
Will taking out a credit card after my discharge help rebuild my credit rating?
Taking out a credit card once you are discharged can help to rebuild your credit rating as long as it’s used effectively and paid off each month. This will demonstrate to lenders that you are able to borrow money and successfully repay it back.
If you are financially struggling and are concerned about the impact a Trust Deed will have on your credit rating please contact a member of the WB Debtcare team for further information.