How Debt Management Plan or DMP Affect My Credit Score?

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DMP allows you to pay less than the minimum repayment amount of your debt. This is the reason why your credit file is likely to be affected when you’re on a DMP.

What is Registered on My Credit File during A DMP?

Once you fall behind debt repayments or pay less than the agreed amount, or when you failed to pay a DMP, your creditor can record appropriate information in your credit file.

Here are lists of the information that your creditor can indicate in your credit file once you did not comply to DMP payments.

  • Payment History

Each of your DMP payments is recorded in your credit file. Since the repayments are less than the amount initially agreed when you take out the credit, the payments are recorded as partial payments. This can happen despite your creditors agreeing to lower your monthly payments.

  • DMP flag

The debt included in your DMP will show an indication that the repayments are through a DMP. This is possible once a creditor accepts your payments offers.

  • Defaults

Your creditor can also record a default on your account to your credit history which will remain for six years. Though you won’t get a default on each of the debt included on your DMP, these instances are common in practice.

  • CCJs, Decrees or Decisions

Your creditor can apply for a CCJ is you live in England and Wales, and a Decree or Decisions if you reside in Scotland, while Money Judgment in Northern Ireland. These details will be recorded n your credit file and will be visible in your credit history for six years.

How long will DMP remain on my credit history?

Though a DMP may not be explicitly registered in your credit file, paying reduced amounts through a DMP can impact a few aspects on your credit history. It takes six years for records involving court judgements, defaults, and decrees to be taken out from your credit record.

So, as soon as you’ve completed a DMP, your next step is to repair your credit. You might consider a credit-builder or avoid credits and pay your bills on time to improve your credit scores.

Getting Mortgages and Tenancy Even on A DMP

  • Getting Mortgage

The lender will certainly conduct a credit check and any negative details on your credit file can affect your application. Another turn down is being unable to secure a deposit for your mortgage. Furthermore, getting a mortgage might be tough while on a DMP.

  • Remortgaging

Though it’s also hard to remortgages while on a DMP, you can consider some options available. Once your deals come to an end, your mortgage lender is likely to offer a standard variable rate. Though this may not be the best offer, still it allows you to continue your mortgage under the same lender.

  • Renting

If you decide for a new tenancy while you’re on a DMP, it can be hard since landlords are likely to conduct a credit check. When they’ve obtained information on your credit, they may hesitate to accept you due to the negative information on your file. This can be possible when you’ve given them consent to check your credit file, and you’ve signed a consent allowing them to do so.

Moreover, some landlords may not necessarily check your creditworthiness through the credit reference agencies but will utilize the public records instead. If this is the case, letting agents and landlords wouldn’t be needing your consent. However, the information that they can obtain is limited to recent records of insolvency and court action. Thus, they can’t see any defaults or miss payments.

My Insurance, Utilities, Phone Contracts While on A DMP

  • Utility Bills

Some utility providers may conduct a credit check. This can occur if you wish to change from a pre-payment meter to a credit meter where can you can pay it weekly on a monthly or quarterly basis.

  • Car Insurance

Financing for car insurance with monthly payments may require a credit check since you’ll need to sign a credit agreement. Lenders granting these credit agreements are less likely to reject you than other types of debt since car insurance can be revoked if you failed to keep payments on time.

While it’s not assured to pass a credit check when on a DMP, extremely few of our clients verbalize issues with car insurance. However, a higher rate of interest can be imposed due to your credit record. This can make monthly payments even higher.

  • Mobile Phone Contracts

We suggest keeping your mobile costs at a lower rate if you’re on a DMP. New contracts usually come with a credit check. The chance of getting rejected is possible to expensive contract with high monthly payments. So, you must try checking for a cheaper contract to increase your chances of getting approved

Can I get new credit while I’m on a DMP or TPP?

When you’re trying to repay your existing debts through a DMP or TPP, you must avoid getting further credits. This can be treated as a breach of contract since you are currently making minimum debt payments.

Your budget should satisfy your essentials so as to avoid obtaining further credit. We highly recommend that you reach out to your DMP or TPP provider prior taking any debt. This way they can decide on what options would best suits you.

In case you need to take out new credit, your lender will run a credit check, and due to the negative impact on your credit details, you might be charged at higher interest rates.

Moreover, you should not consider consolidation loan while on a DMP or TTP. Instead, you must try completing your DMP and pay it off early.

Will my DMP affect the people I live with?

You don’t have to worry with the people living with you since a DMP wont affect them unless it concerns joint debts. In the case of joint debts such as loan taken in joint names, there will be an association of both your credit files.

Improving My Credit Score While on A DMP?

Once you’ve completed your DMP, your credit history will gradually improve and records of missed payments or judgment orders will be taken out after six years. Information, where the account is defaulted or debt not fully paid, will also be taken out.

  • You can consider taking the steps below while on a DMP, or when it’s completed to repair your credit score:
  • Conducting a regular credit review
  • Registering on the electoral role
  • Being on top of your bill payments

How to Check My Credit File

You can check your credit file through the credit reference agencies. You can also review more details using government websites.

Asking Debt Experts

If you find it hard to cope up with your debt payments, get FREE DEBT HELP. Our debt experts can help you determine the right option to get rid of your debts. Should you wish to speak via phone, call us on 0800 193 1024 or use our free online debt advice tool.