Debt problems are often linked with credit rating problems. This makes them doubly difficult to deal and it’s hard to find good sources of information that cover both.
Many of the most read articles on Debt Camel are about the interaction between debt and credit ratings. There may not be a nice answer to your problem, but it helps to understand exactly what is going on and how this is likely to change if you do X, or don’t do Y.
The important first step is to find out what is actually on your credit record – or rather the three credit records that you have with the three credit reference agencies: Experian, Equifax and TransUnion (formerly called Callcredit):
- How to check your credit score? You can now check your credit records with all three credit reference agencies for free. So never ever pay for this! Find out which of the 12 different ways meets your needs;
- Experian or Equifax – which is best? looks at how to check your records with the three agencies and why they sometimes have different credit scores for you;
- Money Saving Expert also has a detailed guide to checking your credit records.
Improving your credit record
- How much will my credit score change if … ? looks at some guidelines from Experian.
- Should I close an unused credit card?
- Will paying off debt improve my credit rating?
- Can I speed up improving my credit score?
- Credit Ladder can paying your rent on time improve your credit score? This is a new facility in 2016 – but it’s not yet reflected in credit ratings and has some potentially serious problems, so read this article before you sign up for it!
- Credit Improver – offers a “guarantee” your credit score will get better – but is it worth paying for?
- Should you add a Notice of Correction to your record? Well perhaps – this article explains how to do this, if you are going to do it you have to do it to all three credit reference agencies, not just one of them. But lenders don’t have to pay any attention to it.
Understanding defaults
A defaulted debt will disappear from your credit record after six years, regardless of whether it has been settled, partially settled, you are still making payments to it, or not paying anything to it at all. This makes the default date a vital piece of information!
- What should the default date for a debt be? This also explains how to get the date corrected if it is wrong.
- Can I get rid of a default? Not normally, but if you feel a default is unfair, then check out this list of situations where it may be possible to have it deleted.
- Will paying a defaulted account help my credit score?
- One less default – why hasn’t my credit rating improved? a reader with several defaults was hoping for an improvement when a large default dropped off
- Misleading threats to add a default Some debts such as a builder’s invoice will never appear on your credit record (unless you get a CCJ) and it is misleading of a creditor or debt collector to suggest that they can.
- What is the difference between Settled and Satisfied on your credit record?
Old debts
A lot of questions relate to issues with old debts – how long are they going to show on your credit record and how can you improve this?
If you are currently making payments to an old debt, then read:
What about a debt that isn’t on your credit file, whether it has dropped off or had never been added:
If you haven’t been making any payments but you aren’t being hassled, you may be wondering if your creditors have forgotten you:
If you have stopped paying anything to a debt for six years, it may become “statute barred” and the lender may no longer be able to take you to court for the money. This isn’t strictly related to credit records – a debt can have dropped off your credit file but not be statute barred – but it’s a vital piece of information for you to know about an “old debt”:
Debt options and their effects on your credit record
If you can’t afford to make at least the minimum monthly payments then you can’t snowball – and your credit record is going to get worse, but how bad will it get?
- How does a DMP affect my credit rating? read this one if you are thinking of a DMP or are in the middle of one
- My DMP is ending – when will my credit record improve? read this one if your DMP is close to the end or has already finished
- How does a Full & Final Settlement affect my credit rating?
- Bankruptcy, IVA, DRO and credit ratings
- Payday loan refunds and your credit record – you don’t have to have a bad (or good!) record to get a refund for a payday loan that wasn’t affordable, but it’s good to know when and why your credit rating matters when you are asking for compensation.
It is a myth that going bankrupt destroys your credit forever. Even the worst problems disappear from your credit record eventually – defaulted debts, CCJs, bankruptcy and the other types of insolvency all “drop off” after six years.
The “clean up” procedures are much the same after all the different sorts of insolvency, but the details such as the timing varies (you can start much earlier with bankruptcy and a DRO) so there is a separate article for each:
- Repair your credit record after bankruptcy
- Repair your credit record after a DRO
- Repair your credit record after an IVA.
Mortgages
A good credit record is important for getting a good mortgage offer – but it isn’t the only thing that matters! You can spend a lot of time and effort trying to increase your credit score when that may not may any difference to your chance of getting a mortgage… And your outstanding debts are also important for a mortgage application, even if they aren’t showing on your credit file! For more details, look at:
“Bad Credit” borrowing
- Four “bad credit” card traps – and how to avoid them Bad credit cards such as Vanquis can be useful tools to rebuild a credit rating when no-one else will lend you anything. But they can also end up costing you a fortune in sky-high interest, so be aware of the problems.
- Payday loans – how to ask for a refund If you couldn’t repay a payday loan without borrowing again, it was “unaffordable” and you should ask for a refund of the interest.
- Three types of bad credit debt to avoid Guarantor loans, logbook loans and pay weekly shops such as Brighthouse – these don’t get as much publicity as payday loans but in many ways they are worse!
- Amigo – not a good way to improve your credit score