How to repair your credit record after bankruptcy (2024)

Bankruptcybadly affects your credit record for six years.

This article looks at what should show on your credit record after you are discharged from bankruptcy. For almost everyone, discharge happens after a year.

But if lenders don’t record bankruptcy and your discharge correctly, they will continue to damage your credit record for longer than they should.

Even if you never want to get into debt again, a good credit score makes it easier to rent a house or get insurance – and it’s essential if you want a mortgage. So making sure the bankruptcy and your discharge is reflected correctly will help you.

The best time to start

There is no hurry to do this, Your credit score isn’t going to get back to good for years…

Lenders take time to change your credit records, so let them have a few months after your discharge. At least three months I suggest.

If you start this too early, it just means more work for you as you will be tackling some “problems” that the lenders would have sorted out themselves.

First check your credit records

There are three different Credit Reference Agencies (CRAs) in Britain.You need to look at all three of them as many lenders only report to one CRA.

Get the Statutory Reports from each of the three CRAs, there is no charge for this, see How to check your credit records for free.

Even if you can get other reports for free, the Statutory Reports are best:

• they are simple
• they can easily be downloaded
• they are “real-time” so you get a current picture of your credit record.

How bankruptcy should be recorded

The key document from SCOR/ICO

The Steering Committee on Reciprocity (SCOR) is the creditor body that decides how credit records should be updated.The Information Commissioners Office (ICO) published Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agenciesin July 2016.

This includes details of what should happen when you go bankrupt and when you are discharged from bankruptcy. Here I call it the SCOR/ICO paper for short.

Check your debts have the right default date

Bankruptcy will be shown in the Public Record section of your credit record. It can sometimes take a few weeks for the entry to appear, but when it does, the date on it will be the date your bankruptcy started.

What should happen:

• an unsecured debt – credit cards, loans, overdrafts etc – should be marked as defaulted with a default date which is your bankruptcy start date.
• there will be no change for any unsecured debts which have already been marked as defaulted.

The end result of this is that all debts in your bankruptcy should be marked as defaulted on or before your bankruptcy.

Secured debts such as mortgages

The situation with a mortgage (or a secured loan or car finance) is slightly more complicated.

If you carry on paying your mortgage after going bankrupt and there are no arrears a default should not be recorded.

When you had stopped paying the mortgage before bankruptcy or when you go bankrupt, a default should be recorded with the bankruptcy start date. This is stated in the SCOR/ICO paper whichsays:

“The default date must be consistent with that of the CCJ/bankruptcy or IVA; therefore a default should be filed as being no later than the date of the insolvency order. [page 7]”

When you are discharged

The Insolvency Service will notify the CRAs who will add your discharge to the Public Record section. This doesn’t remove the bankruptcy marker which will stay for the rest of the 6 years.

This is what the SCOR/ICO paper says should happen:

Your record should be closed and marked as partially settled if…. your account is included in an insolvency such as a bankruptcy or IVA which is discharged/completed and less than the full amount is paid. [page 8].

So all the balances on the bankruptcy debts should be shown as zero.

There are two exceptions. CCJs cannot be marked as partially settled and will continue to show a balance even though you no longer owe any money. And if you have been paying a secured debt such as a mortgage, that will continue to show as up to date.

Six years after you went bankrupt

Everything should vanish and your credit rating will improve significantly!

The bankruptcy marker will drop off your credit record. And all the debts in your bankruptcy will drop off if they had a default date on or before your bankruptcy, as they should have had. CCJs also drop off after 6 years.

The only reason why a debt in your bankruptcy doesn’t drop off when the bankruptcy goes is if the default date isn’t right.

Correcting problems

1) Creditor doesn’t use the right default date

Ask the creditor to correct the record. Don’t complain to Experian, Equifax etc about this – they only report what the creditors tell them.

Don’t do this on the phone – you may be talking to staff who don’t understand what you are saying.Instead complain to the creditor in writing – email is best as you keep a record of it.Put COMPLAINT ABOUT CREDIT RECORD as the subject.

For all debts except for mortgage shortfalls, use this template:

Recheck your credit file after say six weeks. If it has not been corrected, put in a complaint either to the Financial Ombudsman (for consumer credit, mortgages and any insurance debts) or to the ICO (for other debts).Attach copies of your email or letter to the creditor and any reply from the creditor.

2) Problems with mortgage debts

For some reason, mortgage debts can cause problems.Some lenders say that mortgage debts are not included in bankruptcy. That is not correct.

The Financial Ombudsman has explained the facts in this case against Platform:

To clarify, the Insolvency Act covers secured as well as unsecured debts. The main difference being that most unsecured debts will be written-off as there’s no asset the creditor can take into possession to recover the debt. With a mortgage (or indeed a loan secured against any asset, such as a car for example) the lender can repossess the item the loan was secured against – in this case a property – to repay some, or all, of the debt. This doesn’t mean secured debts don’t fall within the Insolvency Act, just that the lender has an additional level of security as there is an item it can take possession of so it doesn’t just write-off the debt. This is the difference between the right to enforce its security over a property, and the right to require a borrower to repay the debt.

And the same applies if you no longer live there but your ex does and is still paying the mortgage. Here is a case against Santander.

In this case, Santander told Miss K incorrect information:

In its final response letter, Santander said as the mortgage is a secured debt it wasn’t included in the bankruptcy and Miss K remains jointly and severally liable for it. And so it said it would continue to report this to her credit file.

The Ombudsman explained this was wrong and said:

Santander should update Miss K’s credit file to show the account defaulted at the date of her bankruptcy and the debt as partially satisfied on the date of her discharge with no entries after this. I said it should pay £250 for the upset and inconvenience this had caused Miss K.

Some lenders say they can only record a default when a house has been repossessed. That is also wrong. the default should not be later than the date of your bankruptcy if you weren’t paying the mortgage.

Use the above template to complain to your lender but add an extra sentence in referring to the Platform decision:

“As the Financial Ombudsman says in https://www.financial-ombudsman.org.uk/decision/DRN2624267.pdf, secured debts such as mortgages are included in bankruptcy. I have not made any payments to this mortgage since the date of my bankruptcy and a default should be added with the date of my bankruptcy.”

3) Debt not marked as satisfied after discharge

The creditor doesn’t have to mark the debt as fully settled/satisfied. So there is no point in complaining if the debt has been marked as partially settled/satisfied.

But if your debts are still showing as having a balance owing, this needs to be sorted,

You can get a Certificate of Discharge from the court where you went bankrupt (this costs £70 and £10 for additional copies) however many lenders will accept a copy of the free letter from the Official Receiver that you may have received. Then send the following letter to the creditor:

Again, complain to the Financial Ombudsman or ICO as above if the entry is not corrected.

NB There is one exception here.There is no ‘partially settled’ status for a CCJ and the court only has to mark a CCJ as satisfied if you have paid it in full, which you haven’t. So any CCJs will continue to show as unsatisfied.

Is it worth doing this?

It is definitely worth correcting the dates of default unless they are just a few weeks late. If these are months late, this delays the time until your credit file is clean as these defaults will still remain after your bankruptcy marker has gone.

Marking your debts as satisfied after discharge is less important. Even if you get this amended, applications for credit, a normal bank account or a mortgage may well be refused whilst bankruptcy is still on your credit file. If you are close to the six-year drop-off, then you could decide to wait and let that clean everything up.

However, getting a debt marked as satisfied will improve your credit rating slightly, which may be enough for you to be approved for a ‘bad credit’ card, see below. It also prevents the debt being ‘sold on’ to another Debt Collector, which is annoying as you have to correspond with yet another person and send them details of your bankruptcy.

Getting positive markers on your credit file

In addition to cleaning out the bad stuff from your credit history, you want to get new, positive credit marks after you are discharged. First make sure you are on the electoral roll, that your address etc are correct on your record, that your bankruptcy discharge is shown and start the clean-up process above. This may take several months to complete if you have to go to the ICO.

Then you have two options.

Get a “bad credit card”

You can apply for a bad credit card such as Vanquis, Aqua or Luma.If you are refused, double-check your credit file really is clean with all threecredit reference agenciesand wait six months or so, then apply to a different card.

This sort of credit card is dangerous. They are aimed at people with very bad credit and they charge a very high rate of interest. This doesn’t matter if you use the card every month and repay it in full every month, so you never pay interest.

Your credit rating will not improve faster if you leave a balance on this card and pay interest. The best thing for your credit rating is to repay it in full each month.

If you find your balance is creeping up because you are not clearing it in full, stop spending on the card until it is cleared and have a re-think about budgeting.

Start saving with LOQBOX

This is a product where you make regular savings for 12 months but it is set up as a loan. So making the savings shows as loan repayment, improving your credit record. At the end of 12 months you have a nest egg saved up that you can withdraw and a credit score that is starting to improve. See How does LOQBOX work for details.

This all takes time

If you were expecting discharge from bankruptcy to make an immediate improvement to your credit score, it usually doesn’t… There isn’t a way to speed this up. while the bankruptcy marker and the defaulted debts in the bankruptcy are still on your credit record, your credit score is never going to get to Fair.

The template letters to your creditors here are very likely to work. If they don’t, putting in a complaint to the Ombudsman or ICO is the best way to repair your credit.

Never pay any firms offering a ‘repair your credit’ service because either they don’t work at allor will be no better than doing what is described here.

This article is kept updated.

More Debt Camel articles: