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Real Questions

How To Increase Your Credit Score

By | Financial Help, Real Questions

How To Increase Your Credit Score

Here at Debt Assist UK we are seeing a growing number of people asking questions about their credit score, and how it can be improved, particularly once they have completed an individual voluntary arrangement (IVA) or debt management plan (DMP).

What Is My Credit Score?

Your credit score is a rating based upon your past credit history. There are three credit reference agencies; Experian, Equifax and Call Credit. Each credit score company compiles their reports in slightly different ways, so it’s worth checking all three to get a complete picture of your credit score.

Don’t sign up for their expensive monthly reports! There are cheap or even free ways to view the same information.

How Long Does It Take To Clear Debts From My Credit Report?

  • Defaults take six years after the first default date.
  • Any arrears can take six years to drop off your credit report.
  • CCJs will take six years to leave your credit report.
  • Bankruptcy, IVAs or DROs will take six years to disappear from your credit report.

As you can see, there is a pattern here, six years is your time-frame to a clear debt record. This means that if you are in an IVA, and have stuck to it, and managed your debts since you started, then you are right on track to a fresh start.

Repaying debts in a debt management plan doesn’t help improve your credit score, however not repaying your debts would only make it worse, and if you want any further credit, you should clear your debts first (and obviously a DMP is a great way to do this). Although, if you haven’t paid anything towards a debt for six years, and it has ‘fallen off’ your debt record, you can pretty much forget about it as it’s (probably) statute barred. If you have been paying a debt and it falls off your credit report keep paying it! You could end up with a CCJ which puts you back to square one.

  • Having a credit card is good, but you need to be using less than 30% of the total value. And paying it off completely each month is best. Get yourself a card with a small limit and buy one thing a month and pay if off straight away. But be careful! If you have just come out of a debt solution you are unlikely to be able to get yourself a ‘good’ credit card, so apply for one of Vanquis or Luma. These are easier to get but have a very high rate of interest (if you repay in full every month, this won’t be a problem).
  • Try and pay more than the minimum amounts.
  • No payday loans for around a year before applying for any kind of credit (best off just trying to avoid them completely).
  • Don’t go into your overdraft.
  • Try to pay by direct debit so that you can’t miss payments.
  • If you switch accounts (mobile phone, utility providers, etc.) make sure you are fully paid up before moving. This is a common cause of defaults.
  • Ensure that your address is up to date on all systems. Just because you didn’t receive the bill, doesn’t mean you can’t get a default (or worse, CCJ).
    Make sure you are on the electoral roll.
  • Make sure that your default date is correct. If not, let the creditor know (a written letter is best). It will move on your credit report and will mean it falls off sooner.

If after your debt solution you have changed your spending habits, then these shouldn’t really be a problem.

Be aware that rebuilding your credit score can take a long time. You should give it at least a year to see improvements.

Will Debt Management Affect My Mortgage?

By | Financial Help, Real Questions

Will Debt Management Affect My Mortgage?

One of our advisers was recently asked, ‘If I apply for debt management, will my mortgage be affected?‘, and going on the theory that if one person asks, many more are thinking about it, I thought I’d explore this question more in depth.

Debt Management and Mortgages

As payments to your mortgage (or rent) are considered a priority debt, these costs are factored into your outgoings before our advisers work out how much you can realistically afford to pay towards your debt management plan. We always ensure that mortgage or rent payments are covered, as the consequences for not paying these can be catastrophic.

What If I Own My Own Home?

If you fully own your home then a debt management plan will have absolutely no affect on it directly…however, a DMP can’t stop your creditors taking court action, which could have an impact on your home. Although this is extremely rare and our advisers will do everything they can to avoid this course of action.

Can I Get A New Mortgage on Debt Management?

To be honest, if you are on a debt management plan and are looking to get a mortgage, you are likely to find it difficult (and this goes for all kinds of credit). However, if you are struggling with debt, you will also struggle, and a debt management plan will help you repay those debts quicker, and therefore the sooner you will be in a position to get credit.