How Breathing Space Could Affect Your Credit Score

It's a common misconception that entering the Breathing Space scheme will harm your credit score. The scheme itself isn't recorded on your credit file, but the circumstances leading to it can.

1. Pre-existing Damage: Before you enter Breathing Space, missed payments or defaults on your debts will have already been reported to credit reference agencies, lowering your score.
2. The Scheme is Not Reported: The Breathing Space scheme itself is confidential. It is not shared with credit reference agencies, so it won't appear on your credit report or have a direct impact on your score.
3. Pausing Further Harm: For 60 days, the scheme prevents creditors from taking action or adding new negative marks for qualifying debts. This halts further damage from those accounts while you seek a solution.
4. Ongoing Responsibilities: You must still pay any debts not included in the scheme. Missing payments on these accounts, such as a mortgage or secured loan, will be reported and will lower your score.
5. Long-Term Impact: The lasting effect on your credit depends on what you do next. If you use the time to arrange a formal debt solution, this will be noted on your file, but it marks the first step toward rebuilding your credit history.

How Much Will Breathing Space Affect Your Credit Score?

The Breathing Space scheme is designed to offer protection from creditors, not to penalize your credit report. Here are a few key things to consider regarding its potential impact on your creditworthiness.

• Not recorded on your credit file. The scheme itself is not reported to credit reference agencies. Therefore, entering Breathing Space will not directly cause your credit score to drop.
• Existing account defaults. Any defaults on your accounts before entering the scheme will remain on your credit file. Breathing Space pauses interest and enforcement but doesn't erase your payment history.
• Future credit applications. Lenders may ask if you have ever used a debt relief program like Breathing Space. Answering yes could affect their lending decision, regardless of your credit score.

How You Can Avoid Breathing Space Affecting Your Credit Score

Prioritise Non-Qualifying Debts

Breathing Space does not cover all obligations. Secured debts like mortgages or car finance, and any new credit taken after the scheme starts, are excluded. Continuing these payments on time is essential to protect your credit file from negative marks during the 60-day period.

Use the Time to Find a Solution

The 60-day period is an opportunity, not a permanent fix. Use this time to work with a debt adviser to establish a sustainable, long-term solution. Addressing the root cause of the debt is the most effective way to rebuild your financial standing and credit score.

Choose the Right Card to Breathing Space

Improving your credit score is an achievable goal that relies on consistent, positive financial behaviors. According to an expert guide, most people can see meaningful changes within three to six months by taking the right steps.

• Establish automatic bill payments. Your payment history is the single most important factor in your score, so setting up automatic payments is the easiest way to ensure you never miss a due date.
• Reduce your credit utilization ratio. Aim to keep your credit usage below 30% of your total available credit, as high utilization can negatively impact your score.
• Monitor your credit reports. Regularly obtain your free reports from the three major bureaus to check for and dispute any errors that could be dragging your score down.
• Become an authorized user. If you have a trusted friend or family member with a strong credit history, being added to their account can help improve your score.
• Limit hard inquiries. Avoid applying for too much new credit at once, as multiple hard inquiries in a short period can temporarily lower your score.
• Diversify your credit mix. Lenders like to see a healthy mix of credit types, such as revolving credit from cards and installment loans like auto or personal loans.

The Bottom Line

The Breathing Space scheme will not appear on your credit file or directly harm your score, but the debts included within it can still affect your overall credit rating.

Frequently Asked Questions

Will Breathing Space appear on my credit report?

No, the Breathing Space scheme is confidential and will not be recorded on your public credit file. Lenders cannot see that you are using it.

Can I apply for new credit during Breathing Space?

It is highly discouraged. The purpose of the scheme is to give you time to seek debt advice without the pressure of new credit agreements or creditor action.

What happens to my credit score after Breathing Space ends?

The scheme itself doesn't directly impact your score. Your score will depend on how you manage your debts and payments moving forward after the period concludes.