How does a Protected Trust Deed affect your credit rating?

The unfortunate answer is badly.

However, the truth is most people who grant trust deeds will already have a bad credit rating, as they will have missed contractual payments to their credit cards and personal loans and may even have defaulted on some of their credit agreements. This means they will have had arrears notices and default notices registered on their credit report.

When someone does miss an instalment to a credit card or loan or have an arrears or default notice served on them, then this information is recorded by credit reference agencies, who record it on their credit records. This information is then retained on their credit reports for six years.

The same is true for any formal debt solution, such as a Protected Trust Deed. This means even if you enter one for four or five years, it can be recorded on your credit report for another one or two years after you have had your discharge.

It, therefore, can have a continuing effect, even once you are debt free.

Will a Protected Trust Deed affect my ability to borrow?

Granting a Protected Trust Deed will affect your ability to borrow once you have granted it, as lenders in deciding whether to lend, will consider your credit history. So, they will look at whether you have a history of missed payments, have had arrears or default notices served or whether you have entered a formal insolvency solution.

This does not mean you will not be able to borrow, as whether a creditor will lend is a decision for the lender to take themselves. Several factors will influence this decision, not just your credit history, but also the lenders willingness to take risks. Some lenders, therefore, may be willing to lend, whilst others won’t.

How else will a Protected Trust Deed affect my ability to borrow?

Even where a lender is prepared to lend to you, granting a Trust Deed may affect the cost of borrowing for you, so you may have to pay higher levels of interest.

However, as time goes on, providing you pay your debts promptly and do not become over-indebted again, your credit rating should begin to improve, meaning your ability to borrow, but also borrow at competitive rates should improve over time.

Does granting a Protected Trust Deed affect my ability to re-mortgage?

Granting a Protected Trust Deed will also affect your ability to re-mortgage, like it will affect your ability to borrow generally. You can, however, in theory re-mortgage whilst in a Protected Trust Deed, although it can be very difficult and your ability to do so can change over time, depending on the state of the financial markets and the willingness of lenders to lend. It will also be influenced by the level of equity you have in your property and your ability to afford any repayments. If you are re-mortgaging whilst in a Protected Trust Deed, or before your Trustee has discharged any interest he has in your property, you will require your Trustee’s permission to do so.

Once you are discharged from your Protected Trust Deed and after your Trustee has discharged any interest he has in your property, you can re-mortgage without your Trustee’s permission, although you may still struggle, depending on the other factors mentioned above.

For more information on your credit report and how to obtain a copy of it, visit our page on how to Check your Credit Report.

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