How does a DMP impact your credit rating?
A DMP is not a legally binding arrangement between you and your creditors, so it will not be listed separately on your credit file but usually as markers against the products to which it relates. This does mean that lenders are likely to be able to see that you have a DMP and are paying a reduced amount on debts you already owe, which may suggest that you are a further risk. This means it could be harder to get credit.
As a DMP is a voluntary arrangement, your creditors could decide to issue a default against you, which would again be visible on your file. They could also apply fees, which could make it harder for you to pay off and result in your file being marked for longer . If you have significant levels of debt that you are struggling to repay, it may be that another debt solution would be better for your needs.
To discuss which debt solution that’s best for you based on your situation, call our knowledgeable, friendly agents FREE on 0800 316 1833 from 8am to 8pm Monday to Friday, and 9am to 3pm on Saturday, or complete our online enquiry form and we will get in touch.
Getting credit with a DMP
We don’t advise taking on more credit while paying debt via a DMP, however sometimes it is necessary. Here are some examples of credit you may need to apply for and how having a DMP may affect this:
Car insurance – Although you will be credit checked when applying for car insurance, it’s unlikely you will be rejected because providers know you can simply cancel. You may be offered an agreement with a higher interest rate, so expect to pay more monthly.
Mobile phone – When applying for a mobile phone, we recommend opting for a low monthly cost to increase your chance of being accepted when the provider runs a credit check on you. The less credit you require, the more likely it will be that you are accepted.
Utility bills – Utility providers will credit check you, expecially if you opt to change from pre-payment to paying monthly or quarterly, so bear this in mind.
Renting a property – Some landlords and letting agents will ask for your permission to perform a credit check on you, and will therefore be able to see that you have a DMP in place. This may result in them being concerned about whether you can pay your rent and bills in full, and opting not to accept you as a tenant. Not all landlords run credit checks however, so there is every chance you will still be able to move into a new rental property, even with a DMP in place.
Getting a mortgage – Most lenders would treat an applicant with a DMP in place with caution, and you can therefore expect that any mortgage you are offered will be at a high interest rate. Some lenders specialise in lending to people with poor credit, so there’s every chance you will find a mortgage provider willing to lend to you. Bear in mind, however, that if you have a DMP in place it’s unlikely you will be able to save a large deposit, which will also result in a less favourable mortgage rate. We recommend you consider working with a qualified mortgage broker to get the best deal for you, however they may charge you a fee.
Remortgaging – Remortgaging with a DMP in place means it is unlikely you will get a good rate. If you are unable to remortgage, your mortgage provider will probably just move you onto their standard rate. Seeking advice from a mortgage broker or financial expert is a good idea, although bear in mind that they may charge a fee.
For expert, impartial advice about DMPs and other debt solutions, please contact PayPlan by calling FREE on 0800 316 1833 from 8am to 8pm Monday to Friday, and 9am to 3pm on Saturday, or complete our online enquiry form and we will get in touch.