How long does a trust deed stay on your credit file?
October 5, 2018
Entering into a Scottish trust deed is an effective way to escape unmanageable debt, and allows for a fresh financial start once the trust deed term has come to an end. As with all official debt procedures, however, there are negative aspects that require consideration.
One of these factors is the adverse effect a trust deed has on your credit rating, and the potential impact on your financial situation both during the trust deed term and in the future.
It has to be said that any form of official debt process, or even the original defaults that led to consideration of this option, also remain on your credit file for six years. So if you’re in a position where debt has become unmanageable, at least you’re taking positive action by choosing the trust deed route.
Why does a trust deed affect your credit file?
Although you’re taking responsibility for your financial position, and positive action to remedy the situation, entering a trust deed demonstrates that you haven’t been able to meet the contractual terms and conditions of lending in the past.
Credit files are used by financial institutions to inform their lending decisions, and help to establish whether applicants can afford repayments over the lending term. They’re a vital part of the application process on which lenders rely to control their risk.
So how long do trust deeds remain on a credit file, and what can you do if you find that your record is inaccurate?
How long does a trust deed stay on your credit file?
A trust deed remains on your credit file for six years, a timescale that exceeds the term of most trust deeds which are generally completed in three or four years. When you’ve successfully completed the trust deed having met all your obligations, creditors included in the agreement should inform the credit reference agencies that their debt has been ‘settled’ or ‘satisfied.’
During the trust deed term, however, and even when you’ve been discharged, you’re likely to experience difficulty in obtaining credit or further borrowing until you’ve been able to rebuild your credit rating.
What if your credit report is incorrect?
If your credit file is inaccurate it could affect your ability to borrow further into the future, so it’s a good idea to send the credit reference agencies a copy of the discharge certificate issued by your trustee.
A few weeks after you’ve been discharged from the trust deed, you should obtain a copy of your credit file from all three main credit reference agencies – Experian, Equifax, and Callcredit – to make sure it’s been updated and that the information they hold about you is accurate.
The insolvency practitioner acting as your trustee isn’t responsible for updating your credit record, and although your creditors have obligations under the Data Protection Act, you cannot always guarantee they will update the credit reference agencies on your situation. This is why it’s important to take this aspect of the process into your own hands.
The benefit of entering into a trust deed is, at the end of the process, any remaining debt is written off, giving you the opportunity to rebuild your damaged credit file and start again with a ‘clean slate.’
If you would like more information about Scottish trust deeds and their impact on your credit file, Scotland Debt Solutions can help. We specialise in helping Scottish residents escape debt, and operate from five offices around Scotland. Call one of the team to arrange a free same-day consultation.
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