How to improve your credit score after a Scottish Trust Deed

May 11, 2017

Scottish Trust Deeds generally last for four years, so if you’ve successfully reached the end of yours, you’ll be starting to think about rebuilding your financial status. But how will the Trust Deed have affected your credit rating, and what can you do to improve the situation?

A Trust Deed remains on your credit file for six years from its start date, alongside previous default notices, and before you’re discharged you won’t be able to obtain credit. When the Trust Deed term is complete, you’ll find that lenders continue to be extremely reluctant to lend until you build up a better credit score, and demonstrate that you can handle your finances.

Here are a few ideas to help you do just that, and secure a more promising financial future:

Inform the credit reference agencies

Once you’ve been discharged from the Trust Deed, you should let the credit reference agencies know as soon as possible. Your trustee will issue a Discharge Certificate which should be copied, and sent to the three main agencies so they can log it on your file.

Check that the information held about you is correct

Credit reference agencies are used by lenders as part of their due diligence procedures, and the information held about you will be a major factor in their willingness to lend. This is why you must check at regular intervals that the information on your credit file is correct.

If creditors have failed to inform the agencies that you’ve repaid certain debts, it will be harming your credit rating. So if you find an error, you should contact the creditor concerned and request that they inform the credit reference agency. The debt should then be marked as ‘satisfied’ on your credit file.

Make sure you’re on the electoral register

Being on the register to vote confirms to lenders that you have a permanent address, which will boost your chances of being offered credit when the time comes.

Use credit to your advantage

Credit can be used to boost your credit score once the Trust Deed term is complete. If you don’t have any lines of credit in the long-term, it can have a detrimental effect on your credit rating. Lenders need to see that you’re responsible with money, and a good way to demonstrate this is using ‘credit builder’ credit cards.

What are credit builder credit cards?

A number of specialist providers offer these cards for people who are trying to rebuild their credit file following a period of debt. As long as you meet all the required repayments in full and on time, your credit rating will be boosted over time.

If you fail to make a single repayment, however, your credit file will be further damaged and you’ll find it significantly more difficult to borrow in the future. Additionally, it’s better to use this type of card for small purchases which can be repaid easily in full, rather than large items, as the interest rates are extremely high if you default.

Lenders generally look at the recent credit activity when they check a credit file, so over time, repaying the balance on your card each month will work in your favour, as it shows that you can now be trusted as a borrower.

Additionally, your lender may be inclined to reduce the rate of interest attached to your card, if you repay in full over the long-term.

Pre-paid credit cards

Pre-paid credit cards may be an option to help you rebuild your credit rating if there are no other alternatives at the end of the Trust Deed. You don’t have to prove your income to the provider when you apply for one of these cards, and there are no credit checks, so you’re guaranteed to be accepted.

There is a monthly fee, however, and this can be ‘loaned’ to you on the card. As long as you repay this monthly fee on time each month, your credit rating is built up and you become eligible for more lending.

Scotland Debt Solutions can offer further detailed advice tailored to your own situation following the end a Trust Deed. We work purely on behalf of Scottish residents in debt, and will arrange a free appointment at one of five offices around Scotland.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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