How a DMP affects your credit score and report

Table of contents

A DMP is an arrangement that can be made between you and your creditors which allows you to pay a smaller amount back each month than originally agreed.

PayPlan offer free Debt Management Plans and we act as an intermediary between you and your creditors. Rather than paying each creditor individually every month, PayPlan take one monthly payment from you which is then distributed between your creditors accordingly. PayPlan is a non-fee charging debt management company which means we don’t charge any fees for setting up or managing DMPs so 100% of your monthly payments go towards paying off your debt.

There are certain debts that can’t be included in a Debt Management Plan, which are known as ‘priority’ debts. These include mortgages, overdue payments for utilities, magistrates’ court fines, TV license fees or overdue income tax or VAT.

What will a DMP look like on my credit file?

A DMP won’t be recorded on your credit report as a separate entry like it would for insolvency options such as an IVA or court judgements.

It is more than likely that the reason you have entered into a DMP is because you have a range of accounts that are in arrears or have even defaulted. Each of your creditors that are included in your DMP will be ‘flagged’ on your credit file (which is added by the lender). This ‘flagging’ allows for other lenders who may be checking your file to know that you’re in an arrangement to repay your debts.

How long will a DMP stay on my credit file?

As DMP’s aren’t specifically recorded on your credit file and instead ‘flags’ are placed on the creditors which you are making reduced payments to, this means that any court actions such as CCJs, defaults or missed payments will be removed six years from the date that it happened.

This may mean that you haven’t fully repaid your debts yet but they are still removed from your credit file. It is worth noting that credit files are updated once a month, so it may not show up straight away.

Can I get more credit when I’m in a DMP?

If you are thinking of getting out more credit then check the terms of your DMP as it may be that you aren’t allowed to borrow more money until you complete the plan.
It is possible to get more credit when you’re in a Debt Management Plan, although it is likely that the amount of money you can borrow will be restricted and it will also have high interest rates associated with it. If you can and choose to borrow credit, then always ensure you can afford the repayments to avoid making your financial situation worse.

I’ve finished my DMP – how do I improve my score?

You can improve your credit score by taking a few simple steps:

Ensure you’re registered on the electoral roll
Consistently make your payments on time each month
Check your details are all correct on your credit file
If you are financially linked to someone but no longer have joint accounts, then apply for a financial disassociation.

Find out if a Debt Management Plan is right for you

If you’re struggling with money, then get in touch with one of our trained advisers at PayPlan today. Get debt help online or call us on 0800 316 1833 for a confidential conversation.

Get free debt advice

Table of contents

FAQs

Why do I have to change my bank account?

If you have a current account with a company you owe money to, you will be required to open a new bank account. This is not only the case with a DMP but you should change your bank account if you are going to make reduced payments to a company that you also bank with. Banks have the “Right to Offset” so any money in your current account could be used to pay another debt with the bank.

Will I have to live on a tight budget during my Debt Management Plan (DMP)?

To enter into and maintain a successful Debt Management Plan you will need to live within a budget, however this is discussed with you openly. PayPlan are required to submit your income and expenditure details to your creditors.

Remember that when we’re negotiating your DMP, it is in your interest if we can show your creditors you are prepared to stick to a realistic budget to help repay your debts.

Will I have to tell my partner about the Debt Management Plan (DMP)?

We offer an absolutely confidential service from start to finish, so PayPlan will never force you to tell your partner about your debt situation, although support is available if you wish to tell them.

A DMP doesn’t usually affect your partner’s credit rating, but if you have a financial association, such as shared debts or guarantor debts, then it could do.

Whenever we contact a client we take great care to avoid divulging the nature of our call to anyone but the client.

Which debts are included in a Debt Management Plan (DMP)?

A DMP will only help you make reduced payments to your unsecured creditors, therefore the debts that can be included are:

Personal loans (loans taken to purchase cars are fine but Hire Purchase (HP) agreements cannot be included as they are secured against the item being purchased)
Credit cards
Store cards
Catalogues
Overdrafts

Secured debts can’t be included in DMPs because any payments on secured debts that aren’t met in full, can lead to the goods being repossessed. This website provides details on house repossession and car repossession, which are all consequences of not maintaining mortgage or hire purchase payments.

Is my home at risk if I enter into a Debt Management Plan (DMP)?

A Debt Management Plan is an informal arrangement which is not legally binding and although having a DMP could reduce the chance that the property would be at risk, there is a chance a creditor could take legal action such as securing a charging order on the property. This would secure the debt and a creditor could force the sale of the property at any point during a debt management.

How a Debt Management Plan (DMP) affects your credit