A reader asked:
My credit rating is very low. I missed payments on three debts five years ago after I was made redundant the previous year. They have default dates in a year or two later.
Since lockdown I have been paying them off slowly. One was paid in full last year and another just repaid this month, but my score hasn’t changed. One more is being paid £50 each month but that won’t be gone until end next year.
I have one credit card which I got two years ago as that was to try and improve my score. The balance is low and I have no issues with it. I now have a real fear of being in debt as I have discovered six years is a long time. Is there anything I can do to improve my credit rating any faster?
Repairing your credit record takes time
This can seem like a very long slow process but you are doing all the right things!
As the defaults get older, they start to have less effect on your credit score. And repaying the debts prevents any problems with CCJs, which would spoil your credit record for another six years.
By having a credit card you are repaying on time, a good repayment marker is added each month. At the moment these good markers don’t seem to help you much because of the defaults. But when the defaults have gone, all that is left will be three years of good debt management, giving a very good credit score.
Expected timeline
From what you have said, I expect the next two years will see your credit rating change as follows:
- a small improvement in your credit score as your good credit marks from the new card continue. It won’t be a big change because of the three defaults still showing.
- an improvement when the first default drops off your file, six years after the default date;
- another one when the next default goes;
- a big improvement when the last default goes, taking your credit record up to very good.
At the moment it probably seems like getting your credit rating up is the most important thing, but that last debt does need to be repaid. Even after it has gone from your credit history the debt still legally exists and you should carry on repaying it or you may get a CCJ.
Can this be made faster?
There isn’t much that can speed credit score improvements. They take time. Never pay for a service that claims to do this.
Repaying the final debt will not change your credit score – but it may make other lenders more likely to give you credit.
If you can get your new credit card balance down to zero, repaying it in full each month, that gives an extra boost to your credit score, see How much will my credit score change if?
Also, your current credit card may not feel like a problem, but you are still paying a high rate of interest on it, so by clearing the balance you stop paying any interest and you may be able to pay more to the remaining default.
Getting another credit card or a loan isn’t going to help, it will just be expensive. And new credit always makes your credit rating worse for the first few months!
Improve your score by saving?
Have a look at LOQBOX.
If you can save £20 a month every month for a year, LOQBOX reports this to the Credit Reference Agencies as though you are repaying a loan which is good for your credit score. And you get all your money back at the end of the year.
This doesn’t get rid of problems on your credit record, but it gets some new positive marks on there.
Look out for these problems
It sounds as though you have looked at your credit record in detail and are being very careful with your finances. I’m not expecting that you will have any of the following problems, but it’s worth being sure!
- make sure you are on the electoral roll. Lenders use the electoral roll to help confirm your identity when you apply for credit. And it adds about 50 points to your rating;
- make sure all your bills are paid on time. It would be a pity to see the last of your defaults disappear only to find your credit score still isn’t great because of a recent late payment for a water bill!
- make sure you check your credit details with all three Credit Reference Agencies as they may have different data. See How to check you credit score which looks at the best free reports to use;
- look out for errors on your credit reports. For example, check you don’t have any financial association with an ex-partner showing which could be causing you problems.
Have you had problems with unaffordable credit?
This is a situation where you may be able to get a default deleted from your credit record if the credit was unaffordable at the time it was given. For example if your credit limit of a credit card was increased too high or if you are in your overdraft every day of the month and have been for well over a year.
If the reader’s problems were only caused by redundancy, then the credit was probably OK when it was given. But if she had already been having problems, it’s worth looking at affordability complaints. Read Making affordability complaints which has articles for the different types of debts, each with a template letter you can use.
Want to get a mortgage?
I’ve written a separate article on this, because mortgage lenders have some specific requirements you need to know about: How fast can I improve my credit score to get a mortgage?
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David says
Hi
I got several defaults back in 2011 and some in very early 2012. I have now paid F&F on all of them. I also had a small CCJ for £372 which I have also paid in full. I am now saving for a mortgage and have no other debts. Will I have a good chance of getting a mortgage when these drop off my file in 2017/early 2018? Will the CCJ still affect me in getting basic credit? I know its on my file until 2020. I just found out that the CCJ was still showing as active on my file but have contacted the relevant authorities. Will my credit improve after this has been updated? How quickly will this happen?
I was considering applying for a bad credit card to help build my rating. Do you think this is a good idea?
Thanks
Sara (Debt Camel) says
You will need to get the CCJ marked as satisfied before any mortgage application. After that your credit score should improve in the next month, by how much will depend on the rest of your credit record, I really can’t guess.
Getting a bad credit card will help your credit record start to improve, not immediately but after a few months, so if you do this now it will definitely be helping by early 2018 when the defaults are all gone.
At that point there will just be the satisfied CCJ still showing but it will be quite old so if you have a good enough income and deposit you may be able to get a mortgage – see https://debtcamel.co.uk/mortgage-with-debts/ and make sure you go through a mortgage broker, not direct to a high street bank.
Gina says
Hi, I have 2 defaulted accounts.
Acc 1 – £1,683 Vodafone default date 02/7/2011
Acc 2- £358 very.com default date 10/5/12
Does that mean account 1 will clear of my credit record around 2/7/17 and acc 2 will clear around 10/5/18?
If the defaults drop after the 6 year mark, what happens to my credit score, will I see a difference and will there be any evidence of those defaults?
Sara (Debt Camel) says
Yes the accounts will disappear from your credit record on those date. There won’t be any trace of the debts left UNLESS there has been a CCJ for the debts, if there has that will stay on your record for another 6 years. See https://debtcamel.co.uk/no-calls-or-letters-about-debt/ for more information.
unless there has been a CCJ or there are other defaults, you should see a big improvement in your credit score when the last default goes.
Gina says
Thank you very much Sara
Mohanned says
Had two small defaults ( £57 & £67 ) both are satisfied few years ago and will come off my file between July and September 2018 . Also have a ccj for £640 dated the 30 January 2014 and was satisfied on 17 December 2015 .
All my other credit accounts ( credit cards – car fainance & retail fainance – mobiles – utilities – ) are paid on time and upto date , other car fainaces by Audi were settled .
My score now with Experian which lenders don’t take into account is poor .. The question is, will my score improves to fair after the two defaults drop or will it still remains as poor till the ccj drop off on 30/01/2020 even though keeping my other accounts upto date and the ccj gets older .
Your answer is much appreciated.
Sara (Debt Camel) says
I would expect to see some improvement in your score when the defaults go, but probably not up to ‘good’ until the CCJ goes. Does it matter? It doesn’t sound as though have a problem getting credit?
Michelle shaw says
Hello, I have just come out of a DRO. I have been checking my credit file to make sure all debts added into the DRO have been satisfied or settled which most have and been closed I am now seeing everything on my credit file as up to date (which has been a long time) my question is I am aware that the DRO will stay on my credit file for 6 years after being discharged but how can I start to rebuild my credit file now to make it more positive to make my score go up? All of my defaults will have gone before my DRO is removed.
Sara (Debt Camel) says
It will be a slow process, but see the advice here: https://debtcamel.co.uk/repair-credit-record-dro/
Hopeful says
Hi Sara,
Firstly thank you for all your advice, since September you have answered my questions and my credit report is improving (after completing an IVA)
Current state:
*1 current account (£2500 Overdraft NEVER EVER used) 8 years old
*1 basic current account – 6 months old
*Loqbox – 9 months old (should I open a new one before this one ends?)
*2 bad credit credit cards £750 limit and £1300 limit – 7 months (utilisation always between 0% and 13%)
*Car insurance, due for renewal next month – should I pay monthly instead of upfront in one payment?
Current scores, not that they really matter, since lenders dont use them and I still cannot get a 0% purchase card of any substantial length.
Experian – 896
Equifax – 483
Credit Karma – 618
No defaults, no late payments, no blemishes on credit report. Average age of credit is reduced due to age of new credit, which I am assuming is the reason for the lack of offers on better cards.
Took a hit from opening all these new accounts but it was necessary to establish credit.
*What can I do to improve my file?
*Will opening new accounts (car insurance, new loqbox) be detrimental and unnecessary?
*Should I just practise patience with the accounts I currently have and only open new accounts when my youngest account is at least a year old?
Thank you again for your advice.
Sara (Debt Camel) says
I suggest you just sit back and wait. It all sounds fine. Two bad credit cards is plenty. Make sure the credit cards are paid off in full every month.
I still cannot get a 0% purchase card of any substantial length.
This may never be possible. these have become increasingly rare.
I suggest you start regular saving so that if you want a large purchse you don’t need credit at all.
AD says
Hi I wanted to ask a question it’s not relevant to this but I didn’t know where to ask it I can’t get any credit and I’m trying to improve my score I’ve partially settled all my debts but it’s going to take time for defaults to come off, I’ve seen the advertisement for [a digital credit card]? Is this any good thanks for your help
Sara (Debt Camel) says
All these credit builder cards help your score a small bit but it will never get up to good until the defaults go.
The one you mentioned I wouldn’t recommend because of the monthly fee. I suggest you look at LOQBOX instead https://www.loqbox.com/en_gb/ if you can afford to save an amount every month for a year – no fees, you get all your money back at the end and it looks on your credit record as though you have repaid a loan. And you can get it no matter how bad your credit score is.
stevi says
Hi,
I can see all of the great advice you are giving and wondered if you could please help?
My credit score on checkmy file is showing as 231.
I have just paid off an IVA over a year early and i’m still waiting on the creditors to respond for my certificate and a settled notification to be shown on my account.
However I also have two defaults showing- both are creditors that have been paid through my IVA.
– default 1- first shown on the account august 2014- and still showing as default no yet settled. will this default be removed august 2020?
– Default 2- first shown on the account august 2014- but is stating the balance is now 0. Will these disappear next month or still now remain for 6 years?
I have disassociated myself from my ex-partner (the reason behind the dept.) and registered on the electoral roll but still not seeing any improvement.
My bank wont provide me with a credit card due to my credit score but I cant see any other way to improve.
I do also have a ccj on account that is due to be removed July 2021.
I am now looking to move forward with my life and would like a mortgage but unsure in how long until this will be possible.
Please help if you are able.
Many thanks
Stevi
Sara (Debt Camel) says
Your credit record will not get up to OK until the IVA and the debts in it drop off in about 2 years. You would normally struggle to get a mortgage at an OK rate before that point and, post-pandemic, things have got harder.
Defaults 1 & 2 – provided there is a default date on those records in August 2014, both will drop off this month whether they are settled or not.
My bank wont provide me with a credit card due to my credit score but I cant see any other way to improve.
Time!
Wait 3 months then make sure all the debts in your IVA show the balance as 0 and partially satisfied. Except for the two dropping off this month which don’t matter.
Get a LOQBOX account now (see https://www.loqbox.com/en_gb/) and save an affordable amount every month for the next year. That looks on your credit record as though you are repaying a loan on time.
After a year apply for a bad credit card and use it each month and repay it in full each month so you never have a balance you pay interest on, this gives your credit score a bigger boost.
Do that and by the time you IVA drops off your credit records you should be in good shape ofr a mortgage, assuming you have a deposit of course. Make sure you apply through a broker, not direct to lender though.
PS cancel the subscription to checkmyfile. That costs £180 a year when you can get all the information for free!
Dave R says
Hi Sara,
Not sure where to post this? Apologies if not right…
Got a notification from ClearScore that my mobile phone account is being removed from my Equifax file. I’ve no idea why, I’ve been with Three for over ten years and never missed a payment or anything and am still a customer with them as it stands.. is there something about Mobile contracts only staying on reports for ten years or something?
Curious to know why this is being removed and now it will impact me?
Sara (Debt Camel) says
no idea. It is possible 3 is switching to using a different credit reference agency?
Dave R says
I think they currently report to all three from the looks of it, maybe they are just stopping reporting to Equifax?
Sara (Debt Camel) says
Possibly. I haven’t heard anything about this.
Dave R says
I’ve solved the issue. It’s because I recently moved house and changed my address with three. They removed my entry from Equifax to readd it with the new address.
No reason to be concerned.
Nick says
I signed up to open banking just now with Equifax and was amused to see that one of the “insights” was not to use cash. This seems a bit odd. This particular account is a rarely used secondary one, so full of other “helpful” advice about how I could do better. Perhaps a caveat about open banking.
“Keep cash withdrawals low
You’ve withdrawn cash 1 times in the last 5 months
How this affects your score
When you use cash or cheques, lenders can’t see what you’re spending your money on. Lenders need to understand your monthly costs so they know you’ll be able to keep up with payments.
If you make low payments each month, lenders are less likely to accept you for new credit. The more you pay off each month, the better your affordability score.
Maintain your score
avoid using cash and cheques more than once a week
use debit cards to pay”
Sara (Debt Camel) says
Big brother wants to watch you!
Tamar says
Hi, I had a loan, credit cards and overdrafts that I rolled into a debt management plan for 3 years. One bank gave me a default after a year ( despite the DMP paying more than the OD charges I’d been paying previously) then after 3 years about 3 or 4 days before I paid everything off, the loan gave me a default. So now I’m 9 months into that long 6 years of waiting for the defaults to come off my credit history so I can live again without being financially punished for doing the sensible thing with my debt…… I had to buy a car. I literally can’t work without one, and my current one is piling up ridiculous amounts of negative equity.. (EVs: the down sides currently neg equity is at £8k, but I can get rid at half liability at the end of the month so I’ve bought a much cheaper car… With a guarantor…) so will be putting a substantial amount on credit as I’ve no savings, I will pay it off in 3 months……will this hurt my credit rating? I’m 44, so am really facing the reality that I may never own a house and may still be in a house share as a pensioner as without good credit, alot of landlords won’t let to you☹️. I had actually started saving till a few months back but then had to give it all to a vet in return for some tablets for my cat… 😔 Worst part of it all is I have a good salary…and really feel I shouldn’t be financially struggling.. will I ever be financially stable?
Sara (Debt Camel) says
Clearing the guarantor loan is the most important thing to do now – any affect on your credit record for doing this early is just a temporary so get it out of the way. And start again saving an emergency fund.
Have you looked at making affordability complaints about the debts that went into your DMP? Any you win will get you some cash refund and also remove the negative mark from your credit record.
See https://debtcamel.co.uk/tag/refunds/ which has different template letters for loans, credit cards, overdrafts etc.