What affects will a debt solution have on my credit score?

Last Modified 16th of February 2021

From debt management plans to bankruptcy, there are a surprising number of debt solutions to choose from. But how will a debt solution affect your credit score? We run through some major points so you can make a well-informed decision.

Administration order

An administration order involves making a single repayment to the court, who will then distribute this among your creditors. The court will keep 10% of each repayment you make and, going by the average, your administration order should only last 2 to 3 years. Payment is taken directly from your wages if you’re in full time work. The administration order is placed on your credit file from the date it starts and will be made public on the Register of Judgements, Orders and Fines. It will be tricky to take out almost any form of credit with an administration order and it’s highly inadvisable to do so.


Filing for bankruptcy should be the very last resort for anyone with debt. You’ll be on the Insolvency Register, a publicly accessible database, for 12 months. The bankruptcy itself will stay on your credit file for six years. Some mortgage providers, and even letting agents, will ask if you’ve ever been bankrupt, which can greatly affect your search for a new home. Avoid bankruptcy if you’re applying for a job in law, finance, the police or armed forces – because there’s a high chance bankruptcy could affect your application.

Debt consolidation loan

This is where you take out one single loan to cover all your debts. The idea is to pay off your debts using the debt consolidation loan – you then make just one repayment a month to the debt consolidation loan provider. As long as you keep up with repayments, then a debt consolidation loan can actually improve your credit rating. But if you default on your payments then it can have an adverse effect on your credit rating.

Debt management plan

Whether this is established by a debt management company / charity or yourself, a debt management plan doesn’t really affect your credit rating. If you keep up with repayments it can boost your credit rating over time (especially if you pay off all your debt!). But if you default on payments or a creditor rejects your proposed repayments then your credit rating could go down.

Debt relief order (DRO)

If you have little to no assets, a disposable income of less than £50 per month and a low amount of debt then a DRO could be the answer. It’s a type of insolvency that enables you to write off debt that you can’t pay in good time. You make a one-off payment of £90 to the Insolvency Service – this can be paid in installments but your application won’t start until you have paid all the fee. It’s recorded on the Individual Insolvency Register up until three months after your DRO finishes. It’s also on your credit file for six years starting from the date it was put into action – this will make it hard to get any form of credit.

Individual Voluntary Arrangement (IVA)

This legally binding agreement between yourself and creditors will affect your credit rating. It stays on your file for six years from the start of your IVA terms. You will also be on the Insolvency Register, which is available for the public to view – making it hard to obtain most types of credit.