Making the final payment towards a formal debt solution like a Protected Trust Deed is a substantial milestone and it should be celebrated as such. It shows that you’ve made consistent repayments for a minimum of four years and are committed to effectively dealing with your debts.
However, while your final payment marks the end of your arrangement, it doesn’t mean your finances will simply snap back into place and it’s important to shift your focus to rebuilding your credit score.
This article will guide you through the process of rebuilding your credit score after a Protected Trust Deed so you can put your debt behind you and get your life back on track.
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What is a Protected Trust Deed?
A Protected Trust Deed (PTD) is a legally binding agreement between you and your creditors (the people or businesses you owe) to repay your debts through a series of affordable monthly payments.
Because of its legal status, a Protected Trust Deed can only be set up and managed by a licensed Insolvency Practitioner (IP) who is a financial professional authorised to oversee your arrangement and liaise with your creditors to distribute your monthly payments.
The difference between a Trust Deed and a Protected Trust Deed is creditor approval. Put simply, as long as more than 50% of your creditors or the creditors to which you owe over a third of your debt agree to the terms of your arrangement, it will be granted protection status.
Under a Protected Trust Deed, your creditors won’t be able to contact you, take legal action against you, or add interest or charges to your debt. This can give you peace of mind to deal with your debts without the added pressure of also having to deal with your creditors contacting or hassling you for payment.
Protected Trust Deeds typically last four years, after which time you’ll be discharged and any remaining debt will be written off.
However, your arrangement can be extended by a further 12 months if your circumstances change (e.g. you can’t release equity or you miss payments).
What is a credit score and how is it calculated?
Your credit score is a three-figure score that represents your ‘creditworthiness’, which is a measure of how likely you are to make repayments on a credit agreement based on your past credit history.
Credit reference agencies then use the information contained in your credit report, such as your payment history, credit activity, and debts, to calculate your credit score.
However, it’s worth noting that because each credit reference agency has their own method of gathering information, your credit reports and credit scores can differ slightly depending on where you access them.
Furthermore, lenders tend to use their own criteria for assessing credit applications. So if one lender refuses your application, this doesn’t necessarily mean every lender will.
Every financial decision you make can have a direct impact on your credit score – both positively and negatively. By familiarising yourself with the various factors that can affect your credit score, you can focus on regaining control of your finances and avoiding further debt.
Which factors affect my credit score?
As previously mentioned, several things can influence your credit score and how likely you are to be approved for credit.
Here are just some of the factors that can directly affect your credit score:
- Personal information (your name, address, marital status etc.)
- Credit history (how you’ve handled credit in the past)
- Enquiries (past credit applications and their outcomes)
- Public records (former insolvencies, debt solutions, court orders etc.)
- Credit mix (how you’ve handled different types of credit)
- Payment history (how you’ve handled past financial obligations)
Remember, having a good credit score can improve your chances of being approved for further credit and make it easier to get your finances back on track after you exit a formal debt solution like a Protected Trust Deed.
How will a Protected Trust Deed affect my credit score?
From the date your Protected Trust Deed starts, it will be visible on your credit file for six years. This means that, if your arrangement lasts the standard four years, it will still be visible on your credit file for another two years.
During these six years, your credit score will be negatively impacted and you’ll struggle to obtain credit, including a mortgage, personal loan, bank account, and even a mobile phone contract.
This is because lenders use your credit score when deciding whether to let you borrow credit and evidence of a past debt solution indicates that you’ve struggled with debt and could potentially default on a future credit agreement.
However, it’s important to note that your credit score will already be damaged by the missed payments or defaults that led to you entering into a Protected Trust Deed so a temporarily damaged credit score is worth it to be able to deal with your debts.
How to rebuild your credit score after a Protected Trust Deed
There are various steps you can take to rebuild your credit score after you complete a Protected Trust Deed.
Here are some of the things you should consider doing to fix your credit score after you’ve made your final payment:
Review your credit report
One of the most important things you can do in the first few months after exiting a Protected Trust Deed is to review your credit report.
Start by obtaining a free copy of your credit report from any of the main credit reference agencies in the UK (Experian, Equifax, or TransUnion) and checking for incorrect and out-of-date information. Something as simple as a misspelled surname or old address could be unfairly dragging your credit score down.
The key to maintaining a good credit score is keeping an eye on each of your credit files and reporting mistakes to the relevant credit reference agency as soon as you spot them.
Set up direct debits for bills
The easiest way to ensure you never miss an important payment is to set up direct debits for your recurring household bills (e.g. rent, utilities, internet).
One of the biggest contributing factors to your credit score is payment history so making payments in full and on time can have a significant impact on your credit score and your ability to secure further credit.
Be ensuring you’re making payments consistently on time, you can prove to lenders that you’re capable of handling credit responsibly and are therefore less of a risk.
Register to vote at your current address
Something a simple as registering to vote at your current address can boost your credit score and this can make lenders more willing to lend you.
This is because lenders use the electoral register to check that the details you’ve provided are correct and that you’re not trying to commit identity fraud.
Registering to vote also lets lenders and financial institutions know that you have a permanent address which can have a positive impact on your credit score.
Consider a credit builder credit card
Credit builder credit cards are a type of credit care designed for people who have a history of debt and are trying to rebuild their credit score.
However, it’s important to meet your repayments as failure to do so will only cause further damage to your credit score and make it more difficult than it already is to access credit.
Because of this, you should only ever use these types of credit cards for purchases you know you’ll be able repay quickly and easily.
Create a realistic budget
Establishing a detailed budget that aligns with your income and expenses is key to regaining control over your finances after you’ve completed a Protected Trust Deed.
Begin by listing your monthly income sources, including wages and benefits, before deducting your fixed expenses, such as rent and utilities. This will leave you with remaining funds for variable expenses, savings, and discretionary spending.
By sticking to a budget, you can ensure you’re living within your means and not at risk of further debt problems.
Prioritise debt repayment
Accelerate your credit score recovery by focusing on debt repayment. Specifically, address any outstanding debts not covered by your Protected Trust Deed and therefore still need to be repaid.
Make at least the minimum payments each month to avoid late fees and negative marks and, if possible, pay more than the minimum payments to reduce balances quicker and limit interest accrual.
Remember, patience and consistency is key to improving your creditworthiness and rebuilding your credit score after completing a Protected Trust Deed.
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How long does it take to rebuild your credit score after a Protected Trust Deed?
Despite what you might have heard or read online, there are no quick fixes or loopholes when it comes to rebuilding your credit score after a Protected Trust Deed.
Instead, the length of time it takes to rebuild your credit score depends on a variety of factors, such as the extent of your debt, how badly your credit score was impacted, and where you want your credit score to be.
Because of this, it could take anything from a few months to a few years to get from where you are to where you want to be. In either case, there are various steps you can take to gradually rebuild your credit score.
Remember, a Protected Trust Deed will remain on your credit file for six years. During this time, your credit score will be negatively affected and you’ll struggle to access further credit or improve your credit rating beyond a certain amount.
However, the longer a Protected Trust Deed is visible on your credit record, the less of an impact it will have on your credit score.
This means that, as long as you’re making timely payments towards your arrangement, your credit score will gradually improve over time.
How can I use credit cards responsibly after a Protected Trust Deed?
Applying for a credit card might be the last thing on your mind after successfully completing a Trust Deed, but it can prove to lenders that you’re capable of handling credit responsibly.
However, because your credit score will still be damaged, it’s important to use credit cards wisely as misuse can be a slippery slope to further debt.
Here are some of the steps you can take to ensure you’re using credit cards responsibly after a Protected Trust Deed:
- Maintain a low credit utilisation – aim to use less than 30% of your available credit limit at any given time
- Pay your bills in full and on time every month
- Review your monthly statements regularly to monitor your spending and spot potential errors
- Avoid only making minimum payments if you can
- Only use credit cards for purchases you know you can afford to repay easily and quickly
- Remember that credit cards are not ‘free money’ and must be repaid if you want to avoid debt
- Do your research – don’t just apply for the first credit card you find
Remember, even if you’ve made your final payment, getting approved for credit isn’t a guarantee and there’s still a chance your application will be refused if your Protected Trust Deed is still visible on your credit record.
How do I know if the information on my credit file is correct?
Most people make the mistake of assuming the information on their credit file is correct and up to date, but this isn’t always necessarily the case.
For example, if your creditors fail to inform credit reference agencies that you’ve repaid a debt or completed a debt solution, your credit rating could be lower than it should be.
Because lenders use the information on your credit record to determine whether to let you borrow money, this could lead to a situation where you’re continually refused credit.
By regularly checking your credit record for errors, you can keep on top of your finances and ensure the information that is visible to banks and financial institutions is an accurate reflection of your current financial situation.
Credit Card Bank Loan £13,420.00 Collection Agency £4,715.00 Payday Loan £1,152.67 Rent Arrears £477.00 Council Tax £279.04 Example case completed in 2023. Repayment calculated using income and expenditure data. Monthly payments and write off percentages are based on individual circumstances.Here’s an example of how we can help.
Let's say you owe...
Total amount owed:
£22,707.91
After a Trust Deed
Can I get a mortgage after a Trust Deed?
One of the most common questions among people who have recently completed a Protected Trust Deed is whether they can get a mortgage after they complete their arrangement.
But the answer isn’t a simple ‘yes’ or ‘no’ and depends on your individual circumstances.
The good news is, while it might not be easy, it’s not impossible to get a mortgage after a Protected Trust Deed – especially if you work with a specialist mortgage lender who is experienced in helping people in similar situations secure a home.
However, it’s worth remembering that a Protected Trust Deed will typically remain visible on your credit record for another two years you’ve made your final payment and this can make lenders wary of entering into a new credit agreement with you.
Because of this, it may be worth waiting until your Trust Deed has been automatically removed from your credit file before applying for any type of credit, including a mortgage.
This will improve your chances of being approved for credit and help you limit any unnecessary credit applications that could potentially cause further harm your credit score.
Conclusion
Completing a Protected Trust Deed can make it feel like the weight of the world has been lifted from your shoulders, but it doesn’t mean there’s not further work to do to rebuild your finances.
There are various things you can do to improve your credit rating after a Protected Trust Deed, from pre-paid credit cards to registering to vote. Generally, the sooner you take action, the sooner you can rebuild your finances.
Remember, fixing your finances and rebuilding your credit score is a gradual process that requires patience, consistency, and discipline. There are no quick fixes that can help you boost your credit score overnight.
