The Debt Arrangement Scheme, or DAS, is a debt procedure available to residents of Scotland who are struggling to repay their unsecured debts. It’s intended to allow for repayment of monies owed without having to enter full insolvency, but despite this, it does still have an adverse impact on your credit file.
So let’s look at how your credit rating is affected by DAS, and what you can do to rebuild your credit score once the arrangement has been successfully completed.
Any form of borrowing default is recorded on your credit file and negatively impacts your credit rating. Even when you repay your debts in full as you would with the debt payment plan that’s the foundation of DAS, the effect on your credit file is the same because you haven’t been able to meet the original contractual obligations set by the lender/credit card provider.
So what does this mean in practice? Your credit file will be negatively affected for a period of six years, and during this time you will find that your borrowing capacity is severely restricted.
Your credit rating helps lenders decide whether or not you pose a risk of default, and is one of the factors that guides their lending decisions. Although the Debt Arrangement Scheme doesn’t involve outright insolvency, the extended period it provides to repay means a ‘marker’ will be placed on your credit record.
This effectively informs lenders and other interested parties that you’ve reneged on the original borrowing terms, and affects your ability to borrow in the future.
It’s unlikely a lender will be willing to let you borrow money whilst you’re in a Debt Arrangement Scheme, and as the fact that you’ve entered DAS remains on your credit record for six years, this could remain the case for some time.
Once you’re able to secure borrowing the terms may be unfavourable, such as high interest rates and restricted products being available to you. The good news is that you can rebuild your credit rating following DAS, as long as you’ve met your obligations under the agreement.
Once you’ve successfully completed the debt payment plan, the first step is to make sure the Debt Arrangement Scheme is marked as ‘satisfied’ on your credit file. If not, you can contact the credit reference agencies (CRAs) and make a ‘notice of correction.’
It’s advisable to check your credit file with all three major CRAs in the UK - Experian, Equifax, and Callcredit - as they may hold differing information on you. Being on the electoral role and using a credit-builder credit card may also help you secure borrowing in the future.
If you would like more information on DAS and the impact on your credit rating, please contact Scotland Debt Solutions. We specialise in helping Scottish residents escape debt for the long-term, and can arrange a free same-day meeting at one of our network of offices around Scotland.
The government has introduced a range of measures to help individuals, families, and sole traders in Scotland who are struggling to cope financially due to the coronavirus pandemic.
When you apply for a personal loan it’s important to be open with the lender and tell them exactly what the loan is for.
Our Scottish based team can help advise you on your debt problems.