How a debt relief order (DRO) will affect your credit file

Having a debt relief order on your credit file shows lenders you’ve struggled to keep up with repayments in the past. This may make them think twice before agreeing to lend you money.

If you want to borrow more than £500 during your DRO, you’ll have to tell the lender about your debt solution. Lenders may refuse an application once you’ve told them this.

Even once your DRO ends – usually after 12 months - you may struggle to find lenders willing to take a chance on you. This is because lenders will check your credit report before deciding. Your DRO will be there for them to see for six years from the date it was agreed.

Some lenders will place more importance on your recent credit history. Others will refuse to lend to anyone while they still have a DRO on their credit file, regardless of whether it was agreed one or five years ago. Lenders that are willing to offer you credit may charge a high rate of interest.

You can’t get a debt relief order removed from your credit report. But, once your DRO ends, it’s worth checking your file to make sure the DRO has been marked as ‘discharged’.

It’s also a good idea to check each debt included in your DRO has been marked as ‘satisfied’ or ‘partially settled’. If not, ask your creditors to update your file.

If you needed a DRO because of an event beyond your control, such as redundancy or a serious illness, you can also apply for something called a notice of correction.

This is a short, written explanation added to your credit report for potential lenders to see. A notice of correction may make a lender more sympathetic to a credit application.

A debt relief order stays on your credit file for six years from the date it’s agreed.

When your debt relief order falls off your credit file after six years, your credit score should improve.

This improvement will be bigger if you have some positive credit markers on your file rather than a blank report. Once your DRO ends, generally after 12 months, there are a number of ways to get positive credit markers added to your report:

Start saving

You can save an agreed amount each month for a year with specialist companies set up to help people with poor credit ratings. These companies report your savings contributions to credit reference agencies as loan repayments. This should boost your credit score, as well as encouraging you to put some money away for a rainy day.

Get a specialist credit card

There are also specialist lenders offering credit cards to people with a poor credit history. Using one of these cards sensibly can help improve your credit score. It’s a good idea to use it once a month for something small. You should then set it up to be repaid in full automatically every month.

These cards charge very high interest. But this won’t matter if you pay it off in full every month as you won’t be charged interest. Repaying the balance in full every month will also mean your credit score improves faster.

Taking out new credit and managing it responsibly won’t instantly boost your credit score to good. But when the DRO falls off your credit report, you'll have positive markers rather than a blank file. This will look better to potential lenders.

The insolvency register is an online database containing information on bankruptcies, individual voluntary arrangements and debt relief orders.

When your DRO is agreed, your details will be added. Your information will stay on the database throughout your DRO and for three months after it ends. This means it’s likely to be on there for 15 months in total.

You can't take out credit of more than £500 during a debt relief order without telling the lender you have a DRO. Lenders may be reluctant to accept a credit application from you once they know this.

After your DRO ends, you can apply for new credit, but it may continue to be a struggle to find mainstream lenders willing to take a chance on you. This is because the DRO will still show on your credit file. It will stay there for six years from the date it was agreed.

There are companies that specialise in lending to people with a poor credit history. Using their products sensibly can help you to start improving your credit rating. But they charge high levels of interest so it’s important to use them wisely.

Once the DRO falls off your credit file, it should start getting easier to find mainstream lenders willing to take you on.

After a debt relief order, there are certain steps you can take to improve your credit rating.

1. Make sure the DRO has been marked as discharged on your credit report.
2. Check each debt included in your DRO has been marked as ‘satisfied’ or ‘partially settled’.
3. If you needed a DRO due to an event beyond your control, like a health problem or redundancy, consider applying for a notice of correction.
4. Make sure you’re registered to vote.
5. Take out small amounts of credit from specialist lenders aimed at people with bad credit.
6. Make repayments on time and in full.

Rebuilding your credit rating will take time but it can be done.