Rebuilding your credit rating after a Scottish Trust Deed
After your Trust Deed has finished, you’ll be raring to get your life back to normal. The rest of your debt has been written off and for the first time in years the burden of debt weighing you down has been lifted.
There’s just one little problem – your credit rating. Once you had a credit card with a limit of thousands, now anything that requires a credit check is an obstacle. Because of the Trust Deed, you’re hard pressed to find anyone willing to give you credit and it’s incredibly frustrating. Even getting a new mobile phone contract could be a problem.
Take heart. The last three years has been the hardest part of having a Trust Deed. Rebuilding your credit - while irritating - will be relatively straight-forward and here are a few tips to get you started.
It’s important to check the file the credit agencies hold on you to see if there are any incorrect entries or associations. For example, you may mistakenly be associated with someone you house-shared with in the past, or if you’re divorced you may still be linked to an ex-partner’s finances. If you do find one, you need to contact the relevant credit agency - Experian, Equifax or Callcredit – and send them a letter of dissociation.
Once everything is completed with your Trust Deed and all the loose ends are tied up, your Insolvency Practitioner will issue you with a Discharge Certificate. Make a few photocopies and send them in to the credit reference agencies so your Trust Deed discharge can be logged on your credit file.
If you have not already done so, ring up your local council and arrange to get onto the electoral register as soon as possible. Being on the register will help give lenders and credit agencies a little more confidence to lend to you after your Trust Deed as it is official confirmation of your address.
If you have to make regular payments on anything – for example a mortgage or mobile phone contract - make sure every one is on time. One of the good things about a Trust Deed is after spending three years making regular payments you end up very good at it! Stick with this habit when the Trust Deed is finished.
Accidents do happen - sometimes a payment will end up late through no fault of your own, but the credit agencies will still hold you accountable and log that mistake on your file – not a good thing to have after your Trust Deed. It pays to be pessimistic and anticipate problems in advance.
Set up direct debits for credit or store card payments to go out well before the payment date. Be aware of cards that take payments every 28 or 29 days, which means the payment dates could change every month. If you have to move a direct debit to another current account, make sure you have enough money to cover it just in case your instructions are not carried out and it is still taken from your old account.
Please be careful if you carry out the following couple of tips; credit cards may have led you down the path to a Trust Deed so you will need strong willpower to ensure they don’t lead you there again.
Despite the damage credit cards do, strangely they can be used for good and help you build your credit rating back up after your Trust Deed. Every time you make a payment on a credit card on time, you add a good credit event to your file so you want to build up a bank of these good credit events. But it’s a fine line to tread – use the card ONLY to pay for one weekly shop or a tank of petrol every month. When the bill comes in, pay it off in full.
Unfortunately only those cards with high rates of 25-40% will be open to you because of your Trust Deed, but this doesn’t matter. You will not be carrying a balance like you used to so bite the bullet and get one specifically designed for people with poor credit histories. Some companies may actually reduce the interest rate over time as you prove yourself credit worthy.
If your credit history is very poor, you may even find getting high APR credit cards is very difficult after your Trust Deed. If that’s that case, there’s a newcomer on the credit card scene that could help. Pre-paid credit cards allow you to put money onto your card in advance and, as long as you pay the card’s monthly fee on time, a record of your good payment will be sent to the credit agencies to go onto your file.
The effect a Trust Deed will have on your credit rating may seem scary at first, but the benefits more than outweigh the disadvantages. The sooner you start building up your credit rating the sooner you will be able to put the Trust Deed behind you and move on to enjoy all the benefits of a debt-free future. |
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