Debt Arrangement Schemes and how they work
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If you think you’d like to explore entering into a DRO, find out how it affects your credit score here
Entering into a DRO can feel like a huge weight is being lifted off your shoulders. But there are some side-effects that go with it too. So before you decide on anything, it’s important that you make sure you understand what it is you’re agreeing to.
If you’ve spoken to a debt advisor and you agree a DRO is right for you, next you need to think about what will happen once you’ve entered into the DRO. What effects will it have on your future? Will you, for instance, be prevented from doing certain things, like applying for credit or a mortgage in the future?
We must point out at this stage that this advice is for people who live in England and Wales. If you live in Scotland, there are a number of other debt solutions you can try, including the Debt Arrangement Scheme and Minimal Asset Process (MAP). And, it’s important to understand that any debt solution comes with both pros and cons, which you should always make yourself aware of before entering into anything.
Where do details of my DRO appear?
Details of your DRO will appear in two places:
1. on the Individual Insolvency Register – this is a public register and will contain details of your DRO, plus your personal name, address and occupation details. However, unlike bankruptcy, entering into a DRO will not appear in any local newspapers or in the London Gazette.
2. on your credit file – this is not a public register, but one that’s used by lenders. When you make an application for credit the lender will use the details they see on your credit history to determine whether or not they want to lend to you.
Your credit history will show your DRO, along with any late or missed repayments, defaults and CCJs for six years. Whilst those details are on your file you may find it harder to obtain credit, or be offered credit at a higher interest rate than would otherwise have been the case. Of course, as you are considering a DRO it’s likely that your credit score is already severely damaged.
It’s also worth mentioning that if you try to get more credit while your DRO is running, you will be breaking the terms of the DRO and could face quite serious consequences, including a Debt Relief Restriction Order or DRRO for short, which can add further restrictions on you for between two and 15 years. This will all be explained in details to you before you decide to enter into a DRO.
How long will the DRO show on my credit record?
The DRO will usually remain on your credit file for six years from the date it began. And, whilst the DRO remains on your credit file, you could find it hard to obtain credit of any kind. It may also prevent you from getting anything other than a basic bank account too. However, there are some things you can do to improve your credit score while you wait for the six years to pass. Read our article How can I improve my credit rating? for more information.
If you think you’d like to talk to someone about the kinds of debt solutions there are available, you can get free impartial advice from the Money Advice Service or you can call, email or chat live with one of our trained advisors now by clicking one of the ‘contact us’ options on the left of the page.
by Shelley BowersBack to blog home