How can I use credit to my 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.
What are 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. By taking out a trust deed with Scotland Debt Solutions, we can help stop the phone calls and letters from those you owe money to immediately. We will contact your creditors and let them you that all further communication must go through us. We work purely on behalf of Scottish residents in debt, and will arrange a free appointment at one of five offices around Scotland.
