Will a Protected Trust Deed affect my credit rating?
Often a primary concern for people considering entering a Protected Trust Deed is how it will impact their credit rating.
Well, as with all debt solutions, a Protected Trust Deed will have a severe impact on your credit rating for 6 years.
What Is Your Credit Rating
Your credit rating is the measure creditors use to determine the level of risk you pose to them whenever they lend you money.
The higher the risk you pose, the lower your credit rating is likely to be.
Creditors generate your credit rating by sharing information with each other through Credit Rating Agencies, or CRAs.
Each time you borrow money from a creditor, they report back to the CRAs to inform them of how punctual your repayments are.
Your payment history builds up over a long period of time and this is why a good credit rating is often cherished.
But the truth of the matter is, this is often misguided logic, for without a great credit rating the chances are you wouldn't have managed to generate so much of a debt problem.
How your credit rating gets damaged
When you enter into a Protected Trust Deed, your Trustee will notify the Accountant in Bankruptcy who, in turn, will add your name to the register of insolvencies.
The register is a public record, kept by government, and available for any member of the public to view.
Each month, the Credit Rating Agencies update their records with the new additions to the register of insolvencies, and a mark is added to the credit file of each person who entered a Protected Trust Deed that month.
Should a person try to seek credit whilst in the trust deed, the marker on their credit rating will act as a warning signal that all is not well.
How long will it last?
Whenever a marker is added to your credit file it stays visible to creditors for 6 years.
After this time the marker is no longer visible to creditors, so they can no longer use it to assess the risk you pose.
The marker will stay on your file for longer than your Protected Trust Deed is active. Assuming your trust deed completes successfully after 4 years, a note will be added to the marker on you file, stating the trust deed has completed successfully.
At this point, whilst you are quite within your rights to seek credit you will, inevitably, find it very difficult to obtain until the 6 years have elapsed.
Repairing your credit rating
Once the 6 year period has elapsed, you are free of the marker on your file.
But this doesn't mean your credit rating is back to its best. Far from it. Because you've had no credit activity of the past 6 years, your creditors no longer have any history available for them to make an assessment of the potential risk you carry.
This means they'll be very cautious at first, whilst they're trying to establish the risks and will remain so until you've demonstrated that you can be trusted.
In some ways, pretty similar to starting out as an 18 year old again.
We can help
Understanding your available options is paramount if you are struggling with a debt problem and the best way to do that is to have a chat with a professional debt adviser.
If you would like to discuss Protected Trust Deeds and how they work, simply call 0800 088 7502.
Alternatively, complete this form and an adviser will call you back at your preferred time.