Will a Protected Trust Deed affect my credit rating?

Often, one concern for people considering entering a Protected Trust Deed (PTD) is how it will impact their credit rating.

Well, as with all debt solutions, a PTD 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 PTD, your Trustee will notify the Accountant in Bankruptcy who, in turn, will add your name to the Register of Insolvencies (ROI).

The register is a public record, kept by government, and available for any member of the public to view.

Each month, the CRAs update their records. They search the new additions to the ROI and mark the file of each new entry.

Should a person in a PTD then try to obtain credit whilst in their arrangement, a marker on their credit file will notify the new creditor that all is not well.

How long will it last?

Whenever a marker is added to a credit file it stays visible to creditors for 6 years.

After this time the marker is no longer referenced by creditors, so they can no longer use it to assess your creditworthiness.

The marker will stay on your file for longer than your PTD is active. Assuming your arrangement completes successfully after 4 years, a note will be added to the marker on you file, stating the PTD has completed successfully.

At this point, even though you are quite within your rights to seek credit, you will find it difficult to do so 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 from which to make an assessment of the threat you pose.

Consequently, they'll likely be cautious with the level of credit they will extend to you at first. But it doesn't take long for their confidence to return.

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 PTDs and how they work, simply call 0800 088 7502.

Alternatively, complete this form and an adviser will call you back at your preferred time.

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