How Long Does a DMP Stay on Your Credit File?
A DMP (Debt Management Plan) is an informal debt solution, chosen by those who want to reduce their monthly debt repayments to one single outgoing. While it is an effective debt solution, it does mean that some negative information will still be listed on your credit report.
This is why it’s important you understand how long a DMP can stay on your credit report and potentially impact it.
How long does a DMP stay on your credit file?
DMPs are not listed separately to your other credit products, on your credit report. This is because they are not registered anywhere official, where there is a central source of information. Instead, they may be added as markers to the credit products you are paying off, for lenders to see when they review you – such as when you apply for something like a loan or credit card.So they will stay on your credit file for as long as it takes you to complete them.
The accounts you are repaying your DMP through will already be listed on your credit report, and once the DMP is complete the marker will be removed and the accounts themselves will be marked as closed – they will then remain listed for six years from the settled date. If they are still open, they will be classed as being paid on time and in full.
Will a DMP affect my ability to get credit?
If you have debts that you are struggling to repay, it is likely that your credit rating is not good, even before you enter into a DMP. However, having a DMP flagged on your credit file does also suggest to lenders that you are a further risk and are paying a reduced amount on the debts that you owe. This means it can be harder to get credit.
A DMP is not a legally binding agreement, so it won’t help if the creditors you are dealing with decide to issue a default against you or increase the fees on later repayments – which can potentially see you get into more financial trouble.
This is why if you have significant debts, which you are struggling to repay, we often suggest taking on another solution instead – such as an IVA (Individual Voluntary Arrangement), which freezes interest and charges and still allows you to benefit from a simple, single monthly repayment. You can read more about Individual Voluntary Arrangements on the site or speak to our team.
What credit can I get while on a DMP?
While we don’t advise taking on more credit while paying debt via a DMP, we understand that sometimes it is necessary. For example, if you need car insurance or a mobile phone contract – as these are both things that are credit checked.
It’s unlikely you will be rejected for car insurance, this is because providers know that you can simply cancel anytime and so will offer an agreement but perhaps at a higher interest rate – so expect to pay more monthly.
When it comes to mobile phone contracts, you will be credit checked by the company you are applying through. To improve your chances of being accepted we recommend opting for a low monthly cost, the less credit you need the likelier it is you may be accepted. So don’t go for the biggest flashiest phone available!
You will also still need to pay utility bills. Utility providers will credit check you, mainly if you opt to change from pre-payment to paying monthly or quarterly, so bear this in mind.
Can I still rent or have a mortgage while on a DMP?
Finding a new home can feel difficult when you are paying your debts through a DMP, whether you are looking to rent or buy. Here we break down how it can affect you:
Renting a property with a DMP
Some landlords and letting agents will ask for your permission to perform a credit check on you, when you apply for a rented property, where they will be able to see any defaulted accounts you may have and that you are repaying your debts via a DMP. This may make them less inclined to accept you as a tenant because they will not feel confident that you can pay your rent and bills in full.
However, not all landlords or lettings agents perform credit checks so there is still a chance that you can find a lovely new home, even with a DMP on your credit report!
Getting a mortgage with a DMP
Getting a mortgage at a good rate can feel tough at the best of times, but with outstanding debts on your credit report your chances are reduced even more. However, some lenders specialise in offering mortgages to people with low credit so it is possible – but you should expect to pay a much higher interest rate.
If you have to take on a DMP though to repay your debts at a lower amount, then it’s unlikely you will also be able to offer a big enough deposit for the mortgage you want.
Remortgaging with a DMP
When your mortgage deal expires, you may want to remortgage to get a better deal but with a DMP and a low credit score you will find it hard to get a good rate. However, if you are unable to remortgage it’s likely that your mortgage provider will just move you onto their standard rate and you can continue paying.
We recommend if you are looking to get a new mortgage or remortgage with a DMP that you work with a qualified mortgage broker – although bear in mind that they will charge a fee for their services – or seek free mortgage advice from a financial expert before you apply for one.
What are the benefits of taking on a DMP?
There are actually many positives that a DMP can offer, when you are trying to remove problem debt. These include:
- Dealing with only one monthly repayment – making the admin around your debt easier.
- Creditors may sometimes freeze charges or interest – this isn’t guaranteed, but has been known to happen.
- The arrangement is informal – this means you can cancel anytime and don’t need to worry about formal insolvency procedures going against you.
- At the end of a DMP, you will be debt free – a DMP will continue until the debts are cleared.
- You don’t have to deal with your creditors – a DMP provider, like PayPlan, will deal with them on your behalf.
Should I take on a DMP?
This all depends on your current situation, as well as how much you owe. But a DMP may be a good option for those who:
- Owe more than £4,500 and are struggling to repay them.
- Can afford to pay their priority debts (such as mortgages and council tax) and general living costs.
- Don’t want to deal with your creditors anymore.
- Want to remove the stress that comes with dealing with multiple debt repayments.
What happens when my DMP is finished?
The debts associated with your DMP may still stay listed on your credit report until the six-year period is up from when they were added – if they have defaulted or there are CCJs associated with them, for example – but the marker for your DMP will be removed.
This may help if you apply for credit but it’s unlikely that your score will dramatically improve simply because the DMP is removed. This is when you will need to think about rebuilding your credit score, which takes time and patience but it can definitely be done! We have a full guide on how to rebuild your credit here on the site, which can help when you reach the end of your DMP and your debts are paid.
How do I set up a DMP?
If you feel that a DMP is the right choice for you, then here’s how to go about setting one up:
- Take some time to prioritise sorting your priority debts – this means ensuring payments for things like your mortgage and utility bills are covered first.
- Check your monthly income and outgoings against your budget to see what you have leftover – this will be what you can afford for a monthly payment.
- Take some time to speak to DMP providers to find one that suits you and your needs – our team here at PayPlan are experts on DMPs and can offer any initial advice you may need when deciding to set up this debt solution.
- Choose your DMP provider and work with them to decide on the agreement.
- When you receive confirmation of your agreement and your contract, check it over carefully before proceeding. Ask questions and ensure you know exactly what everything means.
- Ensure your repayments are made on time and in full until the debt is cleared!
If you are considering taking on a DMP, then we have lots of information readily available or our expert team are on hand to offer advice six days a week via phone or live chat. Get in touch today and take that first step to becoming totally debt free and truly living again.