A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer.
Even if you can secure borrowing, lenders are only likely to offer unfavourable terms, including high interest rates. Others may refuse borrowing until your credit rating improves, so what can you do to rebuild your credit score and demonstrate financial stability?
You need to check that all the information is correct and up-to-date on your credit file, and that your debt payment programme has been marked ‘satisfied.’ You can add a ‘notice of correction’ to incorrect entries if necessary.
Being on the electoral roll confirms your home address to lenders and credit reference agencies, and gives them more confidence to lend. You can do this by contacting your local council.
It may seem counter-intuitive, but using credit can lead to a better credit score – you just have to use it in the right way. Specialist cards called credit builder and pre paid credit cards exist, but should be used very carefully.
Credit builder credit cards have high interest rates, which increase considerably if you miss a single payment. The best way to use them is to make one small purchase each month – fuel, for example – and then pay the balance off in full without fail. Doing this regularly over time sends a message that you can control your finances, and that you present less of a risk to lenders.
Similarly, pre paid credit cards can be useful if you’re not able to secure a credit builder credit card. In this case you add money to your card, and must pay the monthly fee on time to ensure that positive feedback is sent to the credit reference agencies.
Paying your regular bills on time is an effective way to rebuild your credit score. It’s a good idea to set up direct debit payments for household expenses, and also to pay the minimum payment on your credit card. Although you should pay the balance off in full as we mentioned earlier, setting up a direct debit to pay the minimum is simply a precaution that can help you avoid default.
The poor credit score of a spouse or partner can harm your own situation if you’re financially linked. If this is the case it may be a good idea to avoid joint finances if possible, in order to boost your own credit rating.
Scotland Debt Solutions can offer more advice on how to boost your credit rating following a formal debt procedure. We’ve been helping Scottish residents to escape debt since 1989, and can offer you a free same-day meeting to discuss your needs.
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Our Scottish based team can help advise you on your debt problems.