How Does a Debt Agreement Affect My Credit Rating

As someone who has dealt with debt agreements, you may have wondered how they affect your credit rating. Debt agreements can have a negative impact on your credit score, but the extent of the damage depends on a few factors.

First, it`s important to understand what a debt agreement is. A debt agreement, also known as a Part IX agreement, is a formal arrangement between you and your creditors to repay your debts over a period of time. It`s designed to help people who can`t pay their debts in full, but still want to avoid bankruptcy.

Now, let`s discuss how a debt agreement affects your credit rating.

Impact on Credit Score

A debt agreement can negatively impact your credit score. When you enter into a debt agreement, your creditors are notified of your financial difficulties. This information is then recorded on your credit report. Your credit score is based on the information in your credit report, so any negative information will lower your credit score.

The impact on your credit score will depend on the severity of your financial difficulties, the amount of debt you owe, and the terms of your debt agreement. Generally, the longer the debt agreement, the more it will negatively impact your credit score.

Length of Time

The length of time a debt agreement stays on your credit report also affects your credit score. A debt agreement will stay on your credit report for five years from the date it was entered into. This means that your credit score may be negatively impacted for up to five years.

However, once the debt agreement is completed, it will be marked as “paid” on your credit report, which will improve your credit score.

Difficulty Getting Credit

A debt agreement can also make it more difficult for you to get credit in the future. Lenders may view you as a higher risk because of your past financial difficulties. This means that you may be offered higher interest rates, or you may be denied credit altogether.

However, if you`re able to successfully complete your debt agreement, it will show lenders that you`re able to manage your finances responsibly. This may improve your chances of getting credit in the future.


In conclusion, a debt agreement can negatively impact your credit rating in the short term. However, if you`re able to successfully complete your debt agreement, it can improve your credit rating in the long term. If you`re considering a debt agreement, it`s important to understand the potential impact on your credit rating and to make sure it`s the right choice for your financial situation.