A Debt Relief Order (DRO) lasts for one year and then your debts in it are wiped out. But it shows on your credit record for six years.
This article looks at what should happen to your credit record during the DRO year and after it has finished. Some of your creditors may have go tt this wrong, you need to ask them to correct any problems.
You can start to improve your credit rating after the twelve months of your DRO ends, but this will be slow going until the DRO goes after 6 years, when you will see a big improvement.
The reason to start early is that when the DRO and all the debts in it disappear from your credit record, you want some newer good debts to remain, so your record will look great, not empty.
How a DRO should be recorded
To make sure you don’t miss any problems, check your credit records with all the Credit Reference Agencies.
This is what your credit records should show:
After your DRO is approved:
The DRO will show in the Public Record section of your credit record.
All debts which are in your DRO should have a default date which is the date your DRO started or before.
There will be no change for any debts which do not form part of your DRO, but these (things like student debts and magistrates court fines) do not normally show on your credit record at all.
At the end of the 12 months of your DRO:
You don’t get sent a certificate when your DRO completes, see What happens at the end of my DRO? for details. You can print off your Insolvency Register entry when your DRO finishes as proof – but do this quickly as it disappears after three months.
Your credit record will be updated to say your DRO has completed. The DRO marker will remain on your record for five more years, dropping off six years after the start of your DRO.
You no longer owe the debts that were listed in your DRO.
These debts should be marked by the creditors “to show that you no longer owe money on that account (perhaps by marking the entry as ‘partially satisfied’ or ‘partially settled’ or in some other way)” (quote from the Information Commissioner’s Office) and the balance on the accounts should show as zero.
CCJs won’t change, because there is no way to mark them as partially settled.
At the end of six years:
The DRO marker will drop off your credit record.
Some of the DRO debts may already have disappeared. The rest should go at the same time as the DRO marker, because their default date should be on or before the date your DRO started.
CCJs drop off six years from the judgment date, so they also should already have dropped off by this six-year point.
So now your credit record should be completely clean – unless you have had credit problems after your DRO finished.
The only creditors that will be able to tell you had a DRO after the six-year point are those who had a debt included in your DRO. They may still be able to see the DRO on their internal records.
There are two sorts of common problems.
1) a default date is after your DRO started
If the default date is later (or not there at all!) it will delay the point at which your credit file becomes clear. You can ask the creditor to correct the record.
Don’t ask the credit reference agencies to do this – they just report what the creditors tell them.
It can take a while for creditors to add these defaults. I suggest you wait four or five months after the start of your DRO before you bother to do this. By then most should be right and you may only have one or two to deal with.
Don’t try to do this on the phone!
Instead send the following email or letter to the Data Controller for the creditor (get the address from the ICO ), send it Recorded Delivery and keep a copy:
If the creditor replies saying they don’t know anything about your DRO, talk to the DRO Unit about whether the creditor has been informed.
If the creditor knows about your DRO but refuses to add or correct the default date, complain to the Financial Ombudsman if this was a loan, credit card, catalogue or similar financial product and complain to the ICO for utility and similar debts. Attach copies of your letter to the creditor, proof of posting and any reply from the creditor.
One exception – mortgage shortfall debts are unusual in a DRO but if you have one, read How to repair your credit record after bankruptcy which covers these debts.
2) Creditor doesn’t mark debt as satisfied when your DRO has finished
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.
Give them a few months after your DRO has ended to deal with this. There is no hurry, your credit record isn’t going to get up to being good for another five years.
If a debt is still showing an open balance, send the following email or letter to the data controller for the creditor:
Again, complain to the Financial Ombudsman or the ICO if a creditor doesn’t correct the entry.
What if my debt was sold after my DRO started?
Say creditor A (who may be the original lender) sold the debt to creditor B.
The important thing is who owned the debt at the relevant time…
If creditor A owned the debt when the DRO started, they should have added the default to your creditor record at that time. If they didn’t write to them and tell them to do it. Then when that is done, write to creditor B and say you had a DRO and creditor A has now added a default date of dd/mm/yy and ask them to do the same.
If creditor B owned the debt at the time your DRO year ended, they are the one that now needs to mark the debt as settles in some way. Write to them about it.
Is it worth doing this?
Yes. It is worth correcting the dates of default unless they are just a bit late. If they are months or even years late, this delays the time until your credit file is finally clean as these defaulted debts will still show when your DRO itself has disappeared.
It’s also a good idea to get them all correctly marked to show that you no longer owe any money. This doesn’t change your credit score, but it may mean that you are more likely to be able to get credit, probably from a “bad credit lender”.
Having the debt marked as settled also stops the irritation of the debt being ‘sold on’ to another Debt Collector. That isn’t a serious problem – the debt really has been written off – but it is annoying as you have to correspond with yet another person and send them details of your DRO.
Getting positive markers on your credit file
Once your DRO has ended, it’s good to start getting some new, positive credit marks on your credit record.
There is no hurry to do this as your credit rating is going to remain poor for 5 years, but after a while you may want to do what you can to start things going in the right direction.
Can you save regularly?
If you can, then read up about LOQBOX. This is a clever new product that lets you save each month for a year and reports this to the credit reference agencies as loan repayments – so your credit score will benefit as you have taken out a year-long loan and repaid it. There are no fees and you will definitely be accepted for this, no matter how bad your credit score is.
At the end of the year, you will have a nest egg saved up and a better credit score.
Get a “bad credit” card
First deal with the “clean up” process outlined above for your old debts. And make sure that you are on the electoral roll, your address and any other details are all correct with the credit reference agencies. This may take several months to complete if you have to go to the ICO.
Then apply for a Vanquis or a Luma credit card. Vanquis is owned by Provident, Luma is owned by Capital One – if you had a debt to one of these companies in your DRO apply to the other one to maximise your chance of being accepted. If your application is rejected, double-check your credit file really is clean with all three credit reference agencies, wait a few months, then apply for the other card.
These cards charge very high rates of interest. This doesn’t matter because you should aim to repay it in full every month, so you never pay any!
The best thing is to use it once a month for something small such as a tank of petrol and set up the card to be repaid in full automatically every month so you can never forget and pay late.
Your credit rating will improve faster if you repay the full balance every month,
At some point, you will probably want to be able to get affordable credit to spread the cost of a purchase. This is a good time to prepare for that by getting a savings account with your local credit union. Don’t plan to use your horribly expensive credit card, or you will be heading back into debt problems again.
This all takes time
If you were expecting the end of your DRO to make a large, immediate improvement to your credit score, it doesn’t.
Getting a bad credit card or saving through LOQBOX isn’t going to magically increase your score to good. But when the DRO and all the debts in it disappear, having these positive markers then will mean that your credit score is looking good, not just empty.
Never pay any firms offering a ‘repair your credit’ service because either they don’t work at all, or they will be only suggesting what I have said here – there are no shortcuts. The template letters here are very likely to work and if they don’t, putting in a complaint to the ICO is the best way to repair your credit.