Research from Experian reveals that Scottish towns have shown the biggest progress in personal insolvency levels, compared to the first quarter of last year. 15 of the UK’s 20 most improved areas are based in Scotland. Overall, personal insolvencies fell by 13% across the UK between January and March this year.

New laws that came into force in Scotland [1] in April last year have likely driven this significant improvement. The new laws see people in financial difficulty being directed to debt advisors and provided with a broader range of options to get back on track, meaning less people have to rely on insolvency as the only solution. Economic improvements and Scotland’s Debt Arrangement Scheme, which freezes interest and charges on debts, are likely to also have contributed to the improvement.

Across the UK, people renting long-term in social housing showed the biggest improvement, with a 17% drop in people in this group becoming insolvent compared to the same time last year. Families with children living in low-cost homes experienced the next biggest improvement, as personal insolvencies dropped by 10% on the same period last year.

Experian’s Jonathan Westley said: “It’s encouraging to see the impact of the recent changes in Scotland, and that social housing renters and families on tight budgets are leading the way in falling insolvency rates across the UK.  However, despite the many positive signs, there are still pockets of the country which are feeling the strain and the need for responsible lending is greatest. It’s vital that providers have a full picture of their customers’ specific needs, characteristics, and financial situation.”

Other highlights include:

  • Kilmarnock saw the biggest drop in insolvency rates in the last year, falling from 7 insolvencies in every 10,000 households in Q1 2015 down to 2 in every 10,000 in Q1 2016.
  • Bromsgrove in Worcestershire saw the biggest increase, with insolvency rates more than doubling from 5 in every 10,000 households in Q1 2015 to 12 in every 10,000 households in Q1 2016.
  • Seaside towns also continue to house the highest insolvency rates in the country. Scarborough topped the table with a rate of 14 in every 10,000 households, followed closely by Torquay.

Westley added: “We work with lenders to give them a good view of their customers so they can treat vulnerable customers fairly. But for people feeling financial pressures, possibly due to higher property prices and living costs, the road back to recovery can be difficult. It’s possible to come back from insolvency and with patience and the right guidance you can rebuild a positive credit history. Understanding how lenders will view your credit report in light of insolvency is vital.”

Getting back on track

Here are some steps from Experian that people can take to help them regain control of their finances and get back on track after a period of financial stress:

Consider your options: Bankruptcy is a special legal status which will see some debts written off, but this is not the only option available. Informal agreements called Debt Management Plans (DMPs) or more formal agreements like Debt Relief Orders (DROs) or Individual Voluntary Agreements (IVAs) may be more suitable for those in financial difficulty, so take the time to understand the differences between each. Formal debt solutions vary in different parts of the UK.

Seek advice: Organisations such as Citizens Advice, National Debtline and StepChange Debt Charity have experts who can provide you with guidance and help you find a solution that suits your situation. It is important to remember there is support if you need it.

Rebuild a positive credit history: While lenders may view a past insolvency negatively, there are products with low limits and high interest rates available for people with poor credit ratings. Using a credit card for small purchases such as groceries, and paying what you owe each month will help show lenders you’re making progress and can be trusted to pay back what you owe.

Manage your credit responsibly: As you start to get back on track, making all repayments in full and on time each month will show that you are managing your finances, and your credit rating should improve over time. Be patient and take it step by step.

Choose wisely: As your credit rating begins to improve, don’t be tempted to make a flurry of applications. This could make it appear that you’re losing control and make lenders think you’re living outside your means. Try to make no more than one application for credit every three months and use price-comparison websites to research and target deals you’re likely to qualify for.

Source: Experian plc

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