Bankruptcy badly affects your credit record for six years.
This article looks at what should happen to your credit record when you are discharged from bankruptcy after a year. Even if you have no intention of getting into debt again, a good credit score makes it easier to rent a house, get a mobile contract and it’s essential if you want a mortgage.
Contents
Check in detail what your credit records show
There are three different Credit Reference Agencies (CRAs) in Britain.
To do a thorough job of cleaning up your credit records, you need to look at all three of them as many lenders only report to one CRA. If you only check one, you may miss a problem which is only showing on a different CRA.
Get the Statutory reports from each of the three CRAs, there is no charge for this, see How to check all your credit records for free.
Even if you can get other reports for free, the Statutory Reports are best:
- they are simple
- they can easily be downloaded
- they are “real-time” so you get a current picture of your credit record.
How bankruptcy should be recorded
The key document from SCOR/ICO
The Steering Committee on Reciprocity (SCOR) – the group of lenders that decide how credit records should be updated – and the Information Commissioners Office (ICO) published Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies in July 2016.
This includes details of what should happen when you go bankrupt and when you are discharged from bankruptcy. Here I call it the SCOR/ICO paper for short.
After you go bankrupt – check your debts have the right default date
Bankruptcy will be shown in the Public Record section of your credit record. It can sometimes take a few weeks for the entry to appear, but when it does, the date on it will be the date your bankruptcy started.
If it hasn’t already been marked as defaulted when you go bankrupt, an unsecured debt should be marked as defaulted with a default date which is your bankruptcy start date. There will be no change for any debts which have already been marked as defaulted or for CCJs.
Secured debts such as mortgages
The situation with a mortgage (or a secured loan) is slightly more complicated.
If you carry on paying your mortgage after going bankrupt and there are no arrears a default should not be recorded.
When you had stopped paying the mortgage before bankruptcy or when you go bankrupt, a default should be recorded with the bankruptcy start date. This is stated in the SCOR/ICO paper which says:
“The default date must be consistent with that of the CCJ/bankruptcy or IVA; therefore a default should be filed as being no later than the date of the insolvency order. [page 7]”
If you were still paying the mortgage after bankruptcy but later stopped, the default date should still be the date you went bankrupt.
When you are discharged
The Insolvency Service will notify the CRAs who will add your discharge to the Public Record section. This doesn’t remove the bankruptcy marker.
The debts included in your bankruptcy should be marked by the creditors as partially settled with zero owing on the date of discharge. This is what the SCOR/ICO paper says should happen:
Your record should be closed and marked as partially settled if…. your account is included in an insolvency such as a bankruptcy or IVA which is discharged/completed and less than the full amount is paid. [page 8].
Six years after you went bankrupt
Everything should vanish and your credit rating will improve significantly!
The bankruptcy marker will drop off your credit record. And all the debts in your bankruptcy will drop off if they had a default date on or before your bankruptcy, as they should have had. CCJs also drop off after 6 years.
The only reason why a debt in your bankruptcy doesn’t drop off when the bankruptcy goes is if the default date isn’t right.
Correcting problems
1) Creditor doesn’t use the right default date
Ask the creditor to correct the record. Don’t bother to complain to Experian, Equifax etc about this – they only report what the creditors tell them.
Don’t do this on the phone – you may be talking to staff who don’t understand what you are saying. Instead complain to the creditor in writing – email is best as you keep a record of it. Put COMPLAINT ABOUT CREDIT RECORD as the subject.
For all debts except for mortgage shortfalls, use this template:
I went bankrupt on dd/mm/yyyy. I attach a copy of my Bankruptcy Order.
I am writing to ask you to correct my credit file for the above debt. At the moment [there is no default date shown / the default date is shown as dd/mm/yyyy]. This is incorrect and a breach of the SCOR/ICO 2016 guidelines and the Data Protection Act 1998. There should be a default date not later than the start date of my bankruptcy.
Please correct this entry within 28 days or supply me with a written reason why you will not do so.
Recheck your credit file after say six weeks. If it has not been corrected, put in a complaint to the Information Commissioner’s Office here. Attach copies of your email or letter to the creditor and any reply from the creditor.
2) Problems with mortgage debts
It can be harder to get mortgage lenders to correct a date. If the lender has recorded the default date as being the date your house was repossessed not the date of your bankruptcy, you should include in your letter the quote from the SCOR/ICO 2016 document quoted above.
However it seems that sometimes the ICO is failing to apply its own guidelines with this type of situation.
Here is a case where the Financial Ombudsman has upheld the complaint, applying the rules about dates as they are described in this article: Platform mortgage case. So I suggest that if the lender doesn’t correct your record when asked, you should complain to the Financial Ombudsman, not to the ICO.
3) Debt not marked as satisfied after discharge
The creditor doesn’t have to mark the debt as fully settled/satisfied so there is no point in complaining if the debt has been marked as partially settled/satisfied.
But if your debts are still showing as having a balance owing, this needs to be sorted. Ideally you need to get a Certificate of Discharge from the court where you went bankrupt (this costs £70 and £10 for additional copies) however many lenders will accept a copy of the free letter from the official receiver that you may have received. Then send the following letter to the data controller for the creditor:
I [went bankrupt at xxxxx County Court / had my bankruptcy approved] on dd/mm/yyyy. I was discharged on dd/mm/yyyy. I attach a copy of my [Certificate of Discharge/letter of discharge].
I am writing to ask you to correct my credit file for the above debt. The SCOR/ICO guidelines state that my credit file should show the debt was partially settled on the date of my discharge.
Please correct this entry within 28 days or supply me with a written reason why you will not do so.
Again, complain to the ICO/FCA as above if the entry is not corrected.
NB There is one exception here. There is no ‘partially settled’ status for a CCJ and the court only has to mark a CCJ as satisfied if you have paid it in full, which you haven’t. So any CCJs will continue to show as unsatisfied.
Is it worth doing this?
It is definitely worth correcting the dates of default unless they are just a few weeks late. If these are months late, this delays the time until your credit file is clean as these defaults will still remain after your bankruptcy marker has gone.
Marking your debts as satisfied after discharge is less important. Even if you get this amended, applications for credit, a normal bank account or a mortgage may well be refused whilst bankruptcy is still on your credit file. If you are close to the six-year drop-off, then you could decide to wait and let that clean everything up.
However, getting a debt marked as satisfied will improve your credit rating slightly, which may be enough for you to be approved for a ‘bad credit’ card, see below. It also prevents the debt being ‘sold on’ to another Debt Collector, which is annoying as you have to correspond with yet another person and send them details of your bankruptcy.
Getting positive markers on your credit file
In addition to cleaning out the bad stuff from your credit history, you want to get new, positive credit marks after you are discharged. First make sure you are on the electoral roll, that your address etc are correct on your record, that your bankruptcy discharge is shown and start the clean-up process above. This may take several months to complete if you have to go to the ICO.
Then you have two options.
Get a “bad credit card”
You can apply for a bad credit card such as Vanquis, Aqua or Luma. Vanquis is owned by Provident, Luma is owned by Capital One – if you have had debts to either of these firms included in your bankruptcy, I suggest you apply a different one to maximise your chance of being accepted.
If you are refused, double-check your credit file really is clean with all three credit reference agencies and wait six months or so, then apply to a different card.
This sort of credit card is dangerous. They are aimed at people with very bad credit and they charge a very high rate of interest. This doesn’t matter if you use the card every month and repay it in full every month, so you never pay interest.
Your credit rating will not improve faster if you leave a balance on this card and pay interest. The best thing for your credit rating is to repay it in full each month.
If you find your balance is creeping up because you are not clearing it in full, stop spending on the card until it is cleared and have a re-think about budgeting.
Start saving with LOQBOX
This is a new product where you make regular savings for 12 months but this looks like a loan – so making the savings shows as loan repayment, improving your credit record. At the end of 12 months you have a nest egg saved up and a credit score that is starting to improve. See How does LOQBOX work for details.
This all takes time
If you were expecting discharge from bankruptcy to make an immediate improvement to your credit score, it usually doesn’t… There isn’t a way to speed this up. while the bankruptcy marker and the defaulted debts in the bankruptcy are still on your credit record, your credit score is never going to get to Fair.
The template letters to your creditors here are very likely to work. If they don’t, putting in a complaint to the ICO is the best way to repair your credit.
Never pay any firms offering a ‘repair your credit’ service because either they don’t work at all or will be no better than doing what is described here.
This article is kept updated.
How to use a credit builder card
Amigo – not a good way to rebuild a credit score
How does discharge from bankruptcy work?
AB says
Sara
This post is in regard to when exactly a default occurs.
My family, all deedholders in a buy-to let portfolio, have all had to go bankrupt after defaulting on a loan secured on same. We went bankrupt at different times over a 3 year period. Mortgages were maintained until the last bankruptcy.
One lender took the view that until a property was sold, the debt could not be crystallised and so could not be included in a bankruptcy. This had the impact of effectively prolonging the 6 years post-bankruptcy notification to credit reports – a significant inconvenience to the first bankruptee.
We complained to the Financial Ombudsman whose initial view agreed with the lenders position. We are currently challenging this view and would welcome any assistance on our best way forward.
Regards
AB
Sara (Debt Camel) says
One lender took the view that until a property was sold, the debt could not be crystallised and so could not be included in a bankruptcy.
This is wrong. There is no need for a property to be sold for the debt a bankrupt owes to be included in their bankruptcy.
See 43.7 and 43.8 in https://www.gov.uk/guidance/technical-guidance-for-official-receivers/43-creditors-and-liabilities
If the bankrupt concerned asks his Official Receiver about this the OR should be prepared to confirm that the mortgage date was a debt provable in his bankruptcy.
Also point the adjudicator to https://secureservercdn.net/160.153.137.210/mb9.87b.myftpupload.com/wp-content/uploads/2020/08/Principles-for-the-Reporting-of-Arrears-Arrangements-and-Defaults-at-Credit-Reference-Agencies-vesrion-2a-final.pdf which dexribes Industry Best Practice for reporting defaults. It says on page 7
“In normal circumstances lenders will be notified when the debt that is owed to them is to be included in an insolvency e.g. bankruptcy, IVA or similar and should be marked as included in that by filing a default as soon as is practical.
The default date must be consistent with that of the CCJ/bankruptcy or IVA; therefore a default should be filed as being no later than the date of the insolvency order. In circumstances where the lender is not immediately aware, the default can be filed at that point in time. If evidence of the insolvency date is provided, the default date recorded at the CRA will be aligned.”
The fact that this is a joint mortgage is not relevant. The individual filing for bankruptcy has had that debt included in his bankruptcy application.
AB says
Sara
Thank you for your response.
My understanding of the position taken by the lender is based on your reference highlighted above.
https://secureservercdn.net/160.153.137.210/mb9.87b.myftpupload.com/wp-content/uploads/2020/08/Principles-for-the-Reporting-of-Arrears-Arrangements-and-Defaults-at-Credit-Reference-Agencies-vesrion-2a-final.pdf
On page 8 (2nd para)
‘Where there is joint liability and only one party is the subject of an insolvency order, then the account should not automatically be marked in default if it is being maintained by the other party.’
The lenders position
Noted that the bankruptcy of deedholders occurred over a 3 year period.
The lenders point is that because the mortgage was maintained after the first bankruptcy, there was no default – the mortgages were being paid. Nothing to report. This is said to be fair to the first bankrupt deedholder because the possibility is open that until the last man goes bankrupt, it is not certain that there will be a default. The lender would state that their position is consistent with the clause highlighted above.
Your comments are appreciated
AB
Sara (Debt Camel) says
I would still argue that the default for the first person to go bankrupt should be backdated to the date of their bankruptcy – they made no payments after that, the mortgage was included in their bankruptcy from the start and they had no liability to make any payments after that and to make the default later is unfair to them.
AB says
Sara
I totally agree with you. However, it is not my (or your) opinion that counts.
The lenders point is that the tangible fact of the default occurred approx. 3 years after the first bankruptcy – and that their reporting of same is consistent with ICO document. Given that there was no tangible default on the first bankruptcy, what should lender have reported at that time.
The other guidance document you referenced confirm your (and my) opinion – but what happens when two guidance documents appear not to be consistent with each other. Which has precedence. Do lenders have to comply with both guidance documents, or just either.
This is what I believe to be at the centre of the problem.
AB
Sara (Debt Camel) says
FOS looks at all facts in a case and should take a decision that is fair.
That is why I suggested you point out that the mortgage was 100% included in the bankruptcy from day 1, any discussion about whether the debt is crystallised or not is irrelevant. The Official Receiver should be able to confirm that to you in writing which you can show FOS.
You then argue that it is unfair for a default to be added later than the bankruptcy date. If the lender chooses not to add a default at all because the mortgage is being repaid, that is fine. But it is unreasonable for someone to have a default date of later than the bankruptcy added as at tht point they have no liability for the debt so it should be backdated to the bankruptcy date.
AB says
Sara
Thank you for your comments above. You have reinforced my view of the issue.
It has been suggested that the FOS is not the best platform for me to complain to – that this enquiry should have been better placed with Financial Conduct Authority.
Your comments appreciated
AB
Sara (Debt Camel) says
The FCA will not look into an individual query – FOS is the right place.
Maria says
Thank you for the information. I have a couple of questions that I am not clear on.
1. I’d like to apply for a credit card after I’ve been discharged in March this year. I plan on using it for groceries which I will pay straight away.
Will this help start restoring my credit at all? And if so, will it be significant?
2. After the bankruptcy clears from my credit file, will my credit improve? And if so, by how much? Will it be fair, or good, at all? Would having had the credit card as above, help at all?
Sara (Debt Camel) says
After your discharge wait a couple of months and then check all the debts in your bankruptcy are marked as settled as the article above suggests. Get all of these sorted before applying for a bad credit card.
When you get a card it will have a very low limit. Use it once during the month for something that is less than a third of that limit. Do NOT pay it off immediately, but wait until the card statement/email arrives. Then pay it in full. The simplest was is to set up a direct debit to repay the card in full every month.
If you pay it off too soon, no balance shows on your statement and that doesn’t help your credit record. Pay in full after the statement and you never pay interest.
Do this and it will help your credit score a bit after awhile but when the bankruptcy goes yiur credit score should jump to very good.
Maria says
Thank you 😊
GB says
I’m looking into mortgages. I was discharged from bankruptcy 6 years ago but I had a BRU in place. I was discharged from the BRU in Feb 2020. Most lenders who accept previous bankruptcies ask for discharge 6 years after which I am. I’m wondering what affect my BRU plays in this? Am I technically only 2 years discharged? Any help would be appreciated! Thanks!
Sara (Debt Camel) says
You were discharged 6 years ago. I don’t know if a lender will ask about a BRU – I assume it no longer shows on your credit record?
Grant says
Ok thank you. Yes it no longer shows on any of my files I’ve checked them all. Thanks again for your help in the past.
Sara (Debt Camel) says
I always suggest going through a broker when you have been insolvent. Many lenders won’t care after more than 6 years but you want to avoid the ones who will.
Maria says
Hello again,
I have just checked my credit via Clearview and my accounts which have been included in the bankruptcy show as in default. Is this was it is meant to show?
Sara (Debt Camel) says
You haven’t been discharged yet, have you?
Maria says
Not until beginning of March
Sara (Debt Camel) says
Then all your debts included in the bankruptcy should be marked as defaulted with a default date on or before the date of your bankruptcy.
You should forget about your credit record until June. Then come back and have a look.
Maria Sierra says
Thank you for the information.
On another note, as mentioned before, I will be discharged in March bit will still make payments for another 2 years.
Can I open a savings account after being discharged in Mar or do I have to wait another 2 years?
Sara (Debt Camel) says
well you can open a savings account, but I don’t think you should save more then a small amount in it, say £20 a month. If you save a lot more, your trustee may assume you could afford to pay more to your IPA.
Maria Sierra says
Thank you Sara.
I’m looking at my pension and it’s not looking promising 😒
Sara (Debt Camel) says
you want to save into your pension you mean? Are you making payments at the moment?
Maria Sierra says
I have 5 pensions and I’m trying to transfer a few of them so that I end up with 2 only. However, I’m also looking at investing in ISAs, bonds or shares but I’m not sure this will affect my bankruptcy currently.
My partner and I have a plan to buy a home in 8-10 years so I’m in need of my money to make me more money😁 if possible.
I’m an NHS staff so the current pension is not that bad but the pay is😒
Sara (Debt Camel) says
I can’t see a problem with transferring your pensions into a couple of pots. That is not adding more savings.
The difficulty is if you are saving a lot of extra money each month. I think you just need to get through the next couple of years, then you can earn what you want and save as much as you want.
Maria Sierra says
Thank you, makes sense.
Bobby B says
Hello!
I went BR in October 2017, I had defaults registered against me right up to 2021 so I went about the clean up process. Sent the letters etc. All relevent creditors replied but all registered defaults up until my discharge date of October 2018. I thought it could not be any later than my BR order date. I would understand if one or two had made the mistake but all of them seemed like too much of a coincidence. I double checked my request letter and it clearly stated default should be no later than October 2017. As an aside this only appears on the Transunion side. I have no info apprently for Equifax or Experian (using checkmyfile).
Also last question is EE are still reporting US (Unknown Status) right up to today. Is this correct or should it be amended?
Thanks for the website it holds so much informative information and helped me on my BR path many years ago!
Sara (Debt Camel) says
A default date should be added on or before the date of bankruptcy.
Then defaults should be recorded until you are discharged. At that point the defaults should stop and the debt should be marked as settled or partially settled.
this EE debt – is there a default date on it?
Bobby B says
Thank you for explaining that Sarah. On closer inspection, it does appear that all debts are default except for EE and one other, recorded before the bankruptcy date. I was confused as to why defaults then ran until discharge date. I was under the impression defaults could not run past the bankruptcy order date. Thank you for explaining this! In October 2023 my Bankruptcy will have reached the holy 6 year marker. When this hits does it mean all defaults drop off my credit file automatically or will I have to wait an extra year to hit 6 years from discharge?
Thank you again for your invaluable information!
Sara (Debt Camel) says
if the default dates were on or before the date of your bankruptcy, 6 years later they will all have dropped off.
George says
Hi, recently discharged from bankruptcy, having sold the car, I now need a car for work. My credit score is surprisingly good, well above national average(?). No debt or arrears, no DRO’s or IVA’s, paying nothing to nobody. What might be the prospect of getting a small loan to purchase a car? I have a credit card with a big bank but with a very small limit. Would lenders not consider me at all, even though I could more than afford repayments.
I don’t want to start applying for loans to have them rebuked with a hard search left on my credit score.
Sara (Debt Camel) says
the bankruptcy doesn’t show on your credit report? Have you checked with all three credit reference agencies, see https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to do this.
George says
Hi, the bankruptcy does show on the credit report.
I would say my score is probably not well above average but is about average. (just checked)
Sara (Debt Camel) says
Lenders don’t normally use the score you can see, so you may still have a lot of difficulty. there are bad credit car finance lenders that will lend at very high rates of interest though. best to borrow the smallest amount possible from them.
George says
Hi, I didn’t think it would be easy to get a loan. I’ll struggle on with the bicycle even if it kills me (it might) before I go anywhere near that lot.
Thanks again Sara.
Sara (Debt Camel) says
Put aside the money you would spend on car finance and you will be able to buy a cheap car with no finance after a while!
Maria says
Hi Sara,
It’s me again. I’m going to start my nursing degree in September. I’ll be taking a loan and grants. I won’t be able to work full-time due to the nature of the degree.
I plan on hopefully working one day a week if time allows.
It has now been a year and a few days since I filed for Bankruptcy and I currently pay £64 per month. What happens when I no longer have an income and the maintenance loan and grant barely cover expenses? Do you think I will be asked to stop the payments?
Thank you
Sara (Debt Camel) says
As soon as you know the date your income will stop, tell the Official Receiver this and ask for your IPA to be reviewed as you won’t be able to afford it.
Maria says
Thank you 😊
Maria Sierra says
Hi Sara,
When I am reassessed, what happens usually?
I’ve heard in some cases, people pay £0 per month until they start earning again and then their normal monthly payments are reinstated.
Thanks
Maria
Sara (Debt Camel) says
yes that is common. But the IPA cannot go on for more than 3 years from the date it starts. Any months you don’t pay are not added onto the end. So you are unlikely to have finished your degree and started work full time during that time?
Roy says
Hi.
I filed a bankruptcy application in November 2015 … discharged 1 year later … over 6 years later this should now be cleared from my credit file along with all associated debts.
But … Halifax mortgage which was included in my bankruptcy was only shown as defaulted in July 2017 … and will be on my file until July 2023.
They say they will only correct my file if I send them a discharge certificate at a cost of £70 to me. Is that correct given that they didn’t follow procedures and have listed the default almost a year and a half later than my bankruptcy date?
Thanks in advance for any help/advice.
Sara (Debt Camel) says
Well it’s not fair. You can complain if you want and take your complaint to the ombudsman.
Or you can be practical and pay the £70 and get it sorted.
Jay says
Hi Sara,
I’ve just checked my credit file and there is one creditor who states I’m ‘in arrears’. I am discharged from bankruptcy in less than 2 weeks.
Should I be contacting them to request a default notice from the start date of my bankruptcy on this credit with the template on this article?
Best Regards,
Jamie
Sara (Debt Camel) says
yes but I would wait a two or three months. At that point you can ask for a default date to be added AND for the debt to be ,marked as satisfied or partially satisfied.
Silvija says
Hello Sara,
I declared bankruptcy 4 years ago, and have been discharged 3 years now. In my credit report, one credit card is not marked as Satisfied. The default date is correct just no Satisfaction date present. Other cards are marked as Satisfied with the Satisfaction date being the date of discharge. Is it something I should be looking into? I am trying to obtain the mortgage and am not sure if it affects things. Thank you.
Sara (Debt Camel) says
As the article above says, this is incorrect and you can complain and get this corrected.
It may make little difference to your chance of being able to get a mortgage though until the bankruptcy drops off 6 years after it started,
Silvija says
Thank you.
Sue says
I would like some advice on what to do, I went Bankrupt in oct 19, discharged Oct 20. I’ve only just started to clean up my credit file their where 3 company’s with the wrong details all saying I owed money,going by the advice on here I sent them all my discharge letter and your template, 2 of the company’s have been brilliant and sorted but 1 company has just replied sending me back my letters with their letter saying I still owe and to start paying or get in touch, of course I’ve gone straight to https://ico.org.uk to make a complaint but as they are very busy it could take 3 months before they look at my case, should I contact my OR or wait for ico to get in touch.
Sara (Debt Camel) says
who is the company that has not co-operated?
I am afraid it isn’t part of the OR’s role to help you clean up your credit record.
Sue says
Am I allowed to say PayPal Credit
Sara (Debt Camel) says
They can be tricky to have a conversation with. Have you tried emailing them? ppelce@paypal.co.uk
Sue says
The only email was via PayPal portal who told me to call the collections number which I did with their conversation they said it cannot be changed even with a discharge letter.
Sara (Debt Camel) says
These things are hopeless on the phone. I suggest you email the address I just gave with Complaint as the subject. Use the language from the article above.
Sue says
Thank you awaiting their reply and will let you know
Jen says
Today I have won my case against Santander with the Ombudsman, they were adamant I was still liable for my mortgage payments following bankruptcy and continued to report so on my credit file, they have admitted in the final ruling they were wrong. It has been a difficult journey that has taken 18 months, dealing with organisations that should help customers but in fact their staff have very little knowledge. I still have a way to go with Santander saying their systems do not allow the updates required but at least I have the ombudsman’s ruling to back me. Thank you Sara for the resources you provide on this page, without them I absolutely would not have won my case
Sara (Debt Camel) says
Well persevered.
It is bizarre that a very large mortgage lender has so little knowledge of the relevant rules.