How does a debt relief order affect your credit rating?

A Debt Relief Order (DRO) will appear on your credit report for six years from the date it’s approved. It will appear as a note, so future lenders can see it if you apply for credit while it’s listed.

Seeing your credit report impacted can be upsetting when you take positive steps to deal with your debts. But remember, a higher credit score is only necessary if you are applying for further credit, which you shouldn’t need to do in your plan.

Your DRO will be listed on the Public Insolvency Register for the duration of your DRO, usually 12 months.

Your credit report explained

A credit report is a record of your financial history. You can view your credit report anytime, but your lenders can only request if you apply for a new account. It updates every month and shows six years of your history. On your credit report, you’ll find:

• Your personal details – names and addresses
• Your financial history – any credit agreements (loans, credit cards, mortgages, overdrafts), details of your repayments, public records (CCJs, bankruptcies and insolvencies) and financial associates (people who you’ve shared credit accounts with)

Your credit score is a number used by lenders to help them decide if they should lend money to you. If you have a high score, you’re considered a lower risk. If you have a low score, you’re considered a higher risk.

What affects my credit score?

• Missing payments – if you don’t make a payment on time or pay less than your contractual amount (the amount you agreed to repay when you opened your account).
• Applying for new credit – hard credit checks will show on your account when you apply for a new account. Too many of these in a short amount of time can have a negative impact on your score.
• Being close to your credit limit – if you’re maxing out your credit cards every month, lenders might think that you need these for everyday spending and are at risk of financial difficulty.

Will a DRO stop me from applying for a loan or credit card?

Some companies might consider the risk of lending to you too high if you have a DRO listed on your credit report. Others might agree to it but with a higher interest rate than if it wasn’t listed.

While you’re in a DRO, you can’t apply for more than £500 without telling the lender that you’re currently in a DRO, and you’ll need permission from the Insolvency Service.

Can I still rent with a DRO?

It’s unlikely that an existing tenancy agreement will be affected in a DRO if you don’t have any rent arrears.

If you’ve got rent arrears for your current property, your tenancy agreement could be affected by a DRO. A DRO includes all rent arrears, so some landlords might choose to evict you if it breaks the terms of the rental agreement.

Moving home or getting a new tenancy agreement might be difficult in a DRO. Many letting agencies and private landlords complete credit checks when reviewing tenancy applications. The details of your DRO will appear on the credit check.

How can I improve my credit rating in a DRO?

Taking control of your finances is the first step to maintaining a healthy credit score in the future.

There are many simple ways to start rebuilding your credit score, such as registering on the electoral register and paying your current mobile phone contracts and utility bills on time.