If you've got a debt relief order (DRO) or have had one in the past, it will affect your credit rating. This could mean you find it more difficult to get credit in the future.
This page explains what you need to know about how a DRO could affect your credit rating.
Your bank account
The Official Receiver won't tell your bank about your DRO, unless your bank is listed as a creditor. But some banks automatically check whether any of their customers have been given a DRO.
If your bank is included in your DRO or it finds out you have one, it's up to them to decide whether to freeze your account or let you open a new one.
What is your credit rating?
When you apply for a loan or other type of credit, the credit provider will search your credit reference file to see how much of a risk it is to lend to you. The level of risk is known as your credit rating. It can be affected by your personal financial details including:
how you've managed existing bank accounts and credit commitments
whether you've ever had your home repossessed
people you're financially linked to.
More about your credit reference file and credit rating
Will a DRO show up on your credit file?
Your DRO will show up on your credit reference file. It can reduce your chances of getting credit from some lenders, as it shows you've struggled to keep up repayments before.
You're not allowed to get credit for £500 or more without telling the lender that you have a DRO. A lender might change their mind about offering you credit, when they see a DRO registered on your credit file.
The note of your DRO stays on your credit file for up to six years after the date the DRO was made. This means it could be some time before you can get credit in the future.
You might also struggle to open a new bank account during the DRO period and for some time after it has ended.
If you need a new home while you've got a DRO, you could find that your options are limited. Many private landlords and letting agencies will insist on credit checks when you apply for a tenancy, and because the DRO will show up on your credit report, you may be turned down or charged higher fees.
If you're not comfortable with how a DRO can affect your credit rating, you might want to think about a different debt solution.
Options for dealing with debt
Checking your credit file
Your credit reference file is held by the three credit reference agencies. You can check what information the credit reference agencies are holding about you and change anything that is wrong.
More about how to get a copy of your credit reference file
Next steps
FAQs
Will a DRO show up on your credit file? Your DRO will show up on your credit reference file. It can reduce your chances of getting credit from some lenders, as it shows you've struggled to keep up repayments before.
Does a debt relief order affect credit rating? ›
DROs and your credit score. A debt relief order (DRO) can write off your debts if you have a low level of debt and few assets. It affects your credit score while it is in place and for up to six years after it is approved.
Does getting debt relief affect your credit score? ›
Debt relief services may have a negative impact on your credit score, but that impact may not be as big as you think — and in some cases, it can help your credit. How these services impact your credit depends on the debt relief option you choose.
What are the negative effects of debt relief? ›
Cons of debt settlement
Creditors are not legally required to settle for less than you owe. Stopping payments on your bills (as most debt relief companies suggest) will damage your credit score. Debt settlement companies can charge fees. If over $600 is settled, the IRS will view this debt as a taxable income.
Can a debt collection agency affect my credit rating? ›
Will debt collection activity impact my credit score? Your debts will only be passed from your original creditor to a debt collection agency if they're well past due, and this kind of debt collection activity can be harm your credit rating.
How long are you blacklisted after a debt relief order? ›
The note of your DRO stays on your credit file for up to six years after the date the DRO was made.
Is it a good idea to use a debt relief program? ›
If you're one of the millions of Americans struggling to repay high-interest debt, a debt relief plan may be an option to help you get your finances on track. But it's not a quick fix. It's a long-term solution designed to help you get out of debt over a period of time — typically several years.
How long does it take for credit score to go up after debt relief? ›
There is a high probability that you will be affected for a couple of months or even years after settling your debts. However, a debt settlement does not mean that your life needs to stop. You can begin rebuilding your credit score little by little. Your credit score will usually take between 6-24 months to improve.
What are the dangers of debt forgiveness? ›
Using debt settlement options to reduce debt comes with several risks, including late payments on your credit report, potential charge-offs, settlement company fees, tax implications on forgiven balances, possible scams and the overall risk of settlement offers not working.
Does debt relief affect buying a home? ›
Debt settlement could saddle you with more financial problems, like lower credit scores and a bill from the IRS, both of which could make it harder to qualify for a mortgage. Ultimately you can still get a mortgage after debt settlement, but you have to approach the process with some strategy and caution.
The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.
Will debt relief ruin my credit? ›
Debt management plans themselves do not affect your credit scores, but closing accounts can hurt your scores. Once you've completed the plan, you can apply for credit again.
What are 3 things that a debt collection agency Cannot do? ›
Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.
What is the 11 word phrase to stop debt collectors? ›
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
What are the implications of a debt relief order? ›
your DRO will stay on your credit record for six years - this might make it difficult for you to get credit or find a new home in the future. if you have a tenancy agreement it could be affected, your DRO adviser can check this. your bank might close your account and you'll need to open a new one.
How long does debt relief stay on your credit? ›
Debt relief can be a lifeline to help you get out from under unaffordable debt—but it can also damage your credit. So, if you're considering a form of debt relief, you'll want to bear in mind its effect on your credit report, where the information can stay for up to 10 years.
Can I get a loan with a debt relief order? ›
Can I get a mortgage while still in a DRO? No, you can't get a mortgage while you're still in a DRO. But you also can't take out a DRO while you have a mortgage! That's because DROs are made for people who don't have any assets that could be sold to pay off their debts.
