Will a DRO affect your credit rating?

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Will a DRO affect your credit rating?

A DRO will impact your credit record for a period of six years. This is because your credit report looks back over the past six years of your borrowing history. A DRO will therefore impact future credit applications. When you apply for credit, companies look at your credit information to decide whether to lend to you. Learn more about how you can access your free report Here it will give you an idea of how companies see you, and how likely they are to approve your applications.

If you have a DRO and wish to apply for credit of £500 or more, you must inform the lender of your DRO.

Can I get a DRO updated or removed from my report?

You can’t get a DRO removed from your report. However, you can check your report to make sure your DRO has been updated as ‘discharged’ after the DRO period (usually 12 months) is up. If it hasn’t, please tell us. You can also check to make sure that all the accounts that were included in your DRO are marked as satisfied or partially settled. If not, you should contact the relevant company. If you need help, ask us to raise a query with them on your behalf.

Your credit rating is likely to improve in the short term once the DRO and any individual defaults are marked as cleared, and in the medium term as they get older. Some companies will rate your most recent credit history more highly than events that took place several years ago. However, some companies may also have a policy whereby they refuse applicants that have a default on their credit report regardless of how old it is and whether it has been paid or not.

Additionally, if the reason for you defaulting was the result of something out of your control – such as losing your job or a serious illness – you might benefit from explaining this on your credit report. Simply send a statement of up to 200 words to the relevant Credit Reference Agencies. Known as a notice of correction, companies will see this when they check your report in the future and should factor it into their decision.

How can I improve my credit score after a DRO?

This will take time and patience however, it can be done. Reviewing your credit report regularly can help you keep track of your finances better. Making sure it provides an accurate and up-to-date picture of your credit history will ensure you’re painting the right picture. If you do find anything that needs correcting, contact the relevant lender, and ask for an amendment – You can also raise any queries. It’s worth checking the smallest details are correct like the way your name and address are recorded, as this can have a significant impact.

What Is A DRO ?

A DRO is a formal insolvency procedure administered by an Official Receiver for low income, low asset, low debt level situations. A DRO means that you don’t have to pay certain kinds of debt for a specified period (usually 12 months)

At the end of the DRO period, the debts included in it will be written off (or discharged) and you won’t have to pay them.

If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended. If your circumstances change so that you are able to pay some or all of your debts, your DRO may be revoked so that you can arrange to pay your creditors (the people or companies that you owe money to)

Apply For A Debt Relief Order

You cannot apply for a debt relief order (DRO) application on your own. Your application must go through an intermediary approved by the insolvency service.

You can apply through an official receiver, an officer of the bankruptcy court, but you must apply through an authorised debt adviser. They’ll help you fill in the paperwork.

You can chat with our money advice experts here.

DRO Cost and Fees

The official receiver’s fee is £90. This must be paid at the time of the application and won’t be refunded once a decision has been made, even if you aren’t granted a DRO. You need to pay the fee in full before your application will be looked at.

The fee must be paid in cash. Some people are able to get a charity to pay their fee – your debt adviser can tell you more about this.

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DRO Process How Long Does It Take?

Once a Debt Adviser has confirmed a Debt Relief Order (DRO) is the most suitable option for you then the application process normally takes in the region of 10 days.

If your DRO application is successful, the official receiver will:

▪️send you a notice to say that the DRO has been made and outlining all the duties and restrictions that will be imposed on you while it is in force

▪️send a notice of the DRO to each of the creditors owed a debt that the DRO covers

▪️add an entry to the Electronic Individual Insolvency Register (EIIR) showing your details and the fact that a DRO has been made against you. If having your name on the EIIR could lead to violence against you or a member of your household, you can ask the court to order that your name doesn’t appear on the register.

Once your DRO is approved you will then enter a 12 month moratorium period which essentially means that certain restrictions will be based upon you whilst your Debt Relief Order is being processed.

Can A DRO Stop Bailiffs ?

One of the biggest advantages of a Debt Relief Order (DRO) is that it is a formal solution which means it prevents your creditors from taking any further legal or enforcement action against you.

Bailiffs will not be able to attend your property, harass, call or collect for a debt which has been included in your approved Debt Relief Order (DRO).

What If Debt Collectors Continue To Call?

Once your Debt Relief Order (DRO) is approved your creditors have no legal powers to collect the debt outstanding.

You can speak to the debt collection company or bailiff and advise you have entered into a Debt Relief Order (DRO), at this point all impending action should stop immediately.

If they continue to persist after you have advised them of the Debt Relief Order (DRO) you can make a complaint to:

▪ The Debt Collector

▪ The Financial Conduct Authority

▪ The Financial Ombudsman

Debt Relief Order (DRO) – Frequently Asked Questions

What Is An DRO ?

A DRO is a formal insolvency procedure administered by an Official Receiver for low income, low asset, low debt level situations. A DRO means that you don’t have to pay certain kinds of debt for a specified period (usually 12 months)

At the end of the DRO period, the debts included in it will be written off (or discharged) and you won’t have to pay them… Learn More

Applying For A DRO

You cannot apply for a debt relief order (DRO) application on your own. Your application must go through an intermediary approved by the insolvency service.

You can apply through an official receiver, an officer of the bankruptcy court, but you must apply through an authorised debt adviser. They’ll help you fill in the paperwork… Learn More

DRO Cost and Fees

The official receiver’s fee is £90. This must be paid at the time of the application and won’t be refunded once a decision has been made, even if you aren’t granted a DRO. You need to pay the fee in full before your application will be looked at.

The fee must be paid in cash. Some people are able to get a charity to pay their fee – your debt adviser can tell you more about this. Learn More

Benefits of A DRO

A debt relief order can be a cheaper alternative to bankruptcy

You don’t need to pay anything towards your debts for 12 months. After the 12 months, they’ll be written off

Your creditors can’t harass you for your debts during the 12 month period

Although a DRO is a formal debt solution, you don’t need to appear in court.. Learn More

Risks of A DRO

You can only qualify for a DRO if you owe less than £20,000 and live in either England, Wales or Northern Ireland

You’ll need to pay the Insolvency Service a one-off, non-refundable fee of £90. If you qualify, our specialist team can help you apply

You won’t be eligible if you’re a homeowner

A DRO will appear on a public register and will affect your credit report negatively

Learn More

Debts You Cannot Include In A DRO

Most debts are included in a DRO. This includes household utility bills, council tax and consumer debt like credit and store cards. Some debts are called ‘excluded debts’. This means they’re not included in your DRO. The most common excluded debts are:

  • Child maintenance
  • Student loans
  • Budgeting and Crisis Loans from The Social Fund
  • Debts secured against an asset you own
  • Damages or fines a court has ordered you to pay
  • Unpaid TV license fees
  • Any debts that you incur after the DRO is granted
  • Fines for Drug Offences

Learn More

DRO on Credit Report

A DRO will impact your credit record for a period of six years. This is because your credit report looks back over the past six years of your borrowing history. A DRO will therefore impact future credit applications. When you apply for credit, companies look at your credit information to decide whether to lend to you. Learn more about how you can access your free report here it will give you an idea of how companies see you, and how likely they are to approve your applications.

If you have a DRO and wish to apply for credit of £500 or more, you must inform the lender of your DRO… Learn More

What Happens When A DRO Finishes?

At the end of your DRO, the scheduled qualifying debts listed in it will be discharged and you won’t have to pay them. If you obtained any of your debts through fraud, you will have to restart paying them when the DRO has ended.

You can check the date your DRO ended online using the Individual Insolvency Register, when your DRO (moratorium period) has finished, keep your order paperwork.

You might need to show evidence of your DRO order, especially if you are trying to get credit or update your credit record. Anyone can ask you for evidence of your DRO… Learn More

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