How long does a DAS stay on your Credit File?
Unfortunately, using any debt solution will change your credit score for the worse. Creditors will make decisions about whether to lend to you, and what interest rates to offer, based on how you have handled credit in the past. Making use of the Debt Arrangement Scheme (DAS) will let them know that you have been unable to repay what you originally agreed to in the past, so make them more reluctant to provide you with credit.
Despite this, if you are struggling with your debts enough to consider using the DAS in the first place, your credit score is likely to be suffering already. In the long-term, your credit score will benefit more from clearing your debts and getting a fresh start. This is generally faster and easier with a solution such as the DAS.
How long will your Debt Payment Plan be visible to Lenders?
How long a DPP (Debt Payment Plan – the plan agreed to under Scotland’s DAS) will be visible on your credit file depends upon how long the plan lasts, which is determined on an individual basis, and is usually less than 10 years. Your credit file contains six years’ worth of credit history, so will show that you made reduced payments towards your debts throughout your DPP. This means that, depending on your circumstances, a DPP can affect your credit rating for at least six years, and sometimes well over this, as reduced payments gradually drop off the record. Because of these long-term consequences, it is important to carefully consider whether a DPP is right for you before applying for one.
Rebuilding your Credit Score
If potential lenders see a series of reduced payments on your credit file, they will be reluctant to extend you credit, and if they do are unlikely to offer you the best interest rates. This can be frustrating when you need credit to pursue your goals. Fortunately, there is plenty you can do to rebuild your credit score once you have completed your DPP.
- Make sure your Details are correct
To make sure your credit score is as high as possible, first of all make sure you are on the electoral register. This suggests a stable place of residence, which creditors tend to take as a sign of financial stability. You should also request a copy of your credit file (this can be had for around £1 as a one-off purchase) and ensure that all details are correct. For instance, once your DPP has been completed, it is important to ensure that your credit file shows that the debts included in it have been cleared.
- Pay Bills on time
Paying your bills in full, as soon as they arrive, is another simple way to boost your credit score. Over time, this demonstrates to potential lenders that you are capable of committing to regular monthly payments over a long time-period.
- Consider a Credit-Building Card
When your credit score has been impacted by a DPP or other solution, you may find that only high-interest forms of credit are available to you, but these can be used sparingly to rebuild your credit score, and eventually access lower rates. If you do choose this route, make sure to use the high-interest credit card sparingly, and pay your bills in full each month.
- Alternative Sources of Lending
For borrowing larger amounts, you might consider avoiding the high-street lenders altogether, and instead try an alternative solution such as crowdfunding or a credit union. To borrow from a credit union, you will first need to be a member, which usually entails living locally or working within a certain industry, depending on the individual union. Credit unions are not-for-profit sources of credit; members club together to provide each other with low-interest loans for pursuits they believe are valuable to the community.
For more advice on which debt solution would fit you best, you can call a friendly Creditfix advisor on 0808 2085 198.