Credit referencing agencies and DPPs
When credit referencing agencies (CRAs) create your credit file, they're essentially building a picture of how you behave financially. Banks and credit card companies can then decide whether to give you credit based on their information.
Get in touch with a credit rating agency to see what your credit score is. There are three main ones in the UK:
TransUnion (formerly Callcredit)
You can get a one-off credit report from each of the CRAs online. Call Credit and Experian are free to use, and Equifax offer a free 30-day frial (£14.95 per month thereafter). Once you've received the reports check all of the details and compare them. These should show you your credit history for the last six years.
Understanding your credit file
The next thing you should do is check your credit file. Each agency provides guidance on how to read your report:
Your Callcredit file explained (PDF)
How to read your Equifax report
Understanding your Experian report (PDF)
Checking your credit file
Once you're comfortable reading your report, check the following:
- All debts included in your DPP should be listed as starting on or before the start date for your DPP
- Make sure that all the debts included are now showing as completed
- If there are any debts that were included in your DPP that are still showing as outstanding you should write to your creditor to ask them to update this
If there were exceptional circumstances, such as redundancy, that led to your debt you can also request to add a note to your file called a ‘notice of correction’ which lenders are required to read
How to improve your credit file after a DPP
Often the best way to approach this is to take out some form of credit, such as a credit card, with a low limit. Never miss a payment and make sure you always stay within the agreed credit limit.
By getting a small amount of credit and behaving responsibly with it you'll start to build a better credit history and gradually begin to improve your credit file. This can be useful if you're thinking of getting a mortgage in the future.
Looking to the future
Because you’ve lived without any form of credit (except perhaps your mortgage) for a number of years, you may be wary of taking out any form of credit again.
However, if you want to improve your credit file you'll need to allow yourself limited access to credit, or perhaps a credit card for emergencies. Just make sure you stick to your budget, and always pay back anything you owe in full every month.