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How will a Debt Arrangement Scheme affect my credit history?

Posted 26 August 2016

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If you’re struggling with debts and live in Scotland, you might be considering a Debt Arrangement Scheme (DAS). Worried that your credit history will be affected? Here’s what you need to know.

If your debts have become unmanageable, it’s time to seek professional money advice. A Debt Arrangement Scheme (DAS) may be the right solution to help you take back control of your finances. 

DAS is a formal agreement that, in the right circumstances, can help you repay unmanageable debts. Like any debt solution, as well as its benefits, there are downsides to DAS. One being that this plan will affect your credit history. 

Before we explore how your credit history will be impacted, let’s take a look at what DAS is and whether it’s the right choice for you. 


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Is DAS for me? 

Before we get into the nitty gritty, a Debt Arrangement Scheme (DAS) is only available to people who are ‘habitually resident’ in Scotland. So you can’t apply for DAS if you’re living in Scotland temporarily. If you live elsewhere in the UK, a Debt Management Plan (DMP) may be a suitable alternative with similar benefits. You can find out more about how a DMP can help with problem debt here.

Whether DAS is the right solution for you depends on your personal circumstances. DAS is a formal plan that lasts until your debts are paid in full.  You’ll make lower repayments through a Debt Payment Programme (DPP) – and you can be sure that the payments will be set at a level you can afford.  The reduced payments are worked out after taking your essential bills such as your rent, council tax, utilities, food and essential travel into account. 

As DAS is legally binding, you are protected from creditors taking further action against you, in particular, court enforcement. You’ll also get less contact from your creditors and any interest and charges will be frozen, allowing you to repay what you owe over a longer period without your debt increasing.

This protection from your creditors remains for the time that you’re on DAS, as long as you stick to the terms of the solution. For example, if you miss any of your monthly payments, your DAS can be revoked and further action may be taken against you.

How will my credit history be affected? 

As with any debt solution, a Debt Arrangement Scheme (DAS) will negatively affect your credit history, even after you’ve repaid your debts and completed the solution.  

The reason for this is that once you’re on DAS, you’ll no longer be making your contractual payments – you’ll be making lower payments. Therefore it’s highly likely that defaults will be issued and they will show on your credit history.

Creditors will issue default notices when they consider the agreement between you and them to be broken, usually after you’ve missed three to six payments. They are visible to other creditors and firms that can run credit checks. If you’ve already missed payments and defaulted on the account before starting DAS, your credit history will already have been damaged.  

Defaults remain on your credit file for six years from the date they’re issued. This means that they can still affect your credit file after you’ve completed your DAS (depending on how long it is due to last). 

As your credit history shows how well you’ve managed your borrowing in the past, you might find that future borrowing is more difficult or more expensive as you may not be offered the best rates of interest. Any defaults will also show up if you apply for anything else that requires credit checks, such as a tenancy agreement or mobile phone contract. 

What are my options? 

As long as the benefits outweigh the downsides, DAS may still be the right solution to help you deal with unmanageable debts.   

You can find out more about the pros and cons of a Debt Arrangement Scheme  (DAS) on our blog. An approved Money Advisor can explain your options and also give you advice on how to improve your credit history once the solution is over. 

To find out whether DAS is the most suitable solution for you, contact one of our debt experts today by using the options to the left of the page. 


by Christine Walsh

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