A debt management plan (DMP) is a good debt solution for many people who can manage to repay their debts if interest stops being added.
If you are trying to decide whether you need one, you may want to know how bad the effect will be on your credit file, and how long it will be before your credit rating recovers. There isn’t a simple answer:
- DMPs are used in a lot of different situations;
- because they are “informal” arrangements creditors don’t all have to respond in the same way;
- each future lender does their own credit assessment and these may give different weights to parts of your credit history.
This article looks at what may be recorded on your credit file in a DMP and how lenders tend to view these. It also applies to payment arrangments, which have much the same effect on your credit record as a DMP.
Contents
How important is your credit rating?
On one level, not very! If you can’t manage the normal debt repayments no debt solution will let you pay less and keep a good credit record.
Also you may have a great credit rating but be unable to get any 0% balance transfers or other helpful offers, in this case your good rating isn’t helping you at all.
Finding the right debt option for you and your family so you can clear your debts is the key to your financial future. Your credit rating is only a very small piece of this bigger picture. So don’t let worries about your credit rating stop you from making the right debt decision.
How does a DMP show on your credit record?
Lenders don’t all mark your debts in the same way
Lenders mark your credit record in one of 3 ways in a DMP:
- some lenders will default your debt as soon as they are told there is a DMP;
- some lenders will add an Arrangement To Pay (AP) marker at the start and then change that to a default after a few months or when they sell the debt to a debt collector;
- some lenders will continue with AP markers until your DMP ends.
Surprisingly, defaults are often BETTER
Defaults sound bad. And they have a worse effect on your credit score than AP markers.
So you may want to avoid defaults and just have arrangement markers… but AP markers arent good either…
What is important is not just how bad the effect on your credit score is, but how long it will last.
Defaults fall off your credit record after 6 years, even if you are still repaying the debt. AP markers stay on your credit record for 6 years after the debt has been settled.
A couple of examples show the dramatic difference:
- if your DMP last 4 years, and you had defaults, your credit record will be totally clear after after 6 years. But if you had AP markers, they would still be showing until 10 years after your DMP began.
- if your DMP lasted 7 years, then again any defaults will be gone after 6 years. But AP markers would be on there for 13 years.
It may be best to ask for a default to be added!
Defaults mean your credit record will be clean sooner than AP markers. So if a lender has added AP markers, you may want to ask them, to add a backdated Default to your record. See What should the default date for a debt be? which explains how to do this.
How do future lenders view DMPs?
It’s hard to generalise as each lender has their own method of credit scoring, but most people would agree with the following:
- creditors don’t like Defaults. Some may prefer to see an Arrangement to Pay (AP) in your history rather than a Default. But many will see both as a problem, no difference between them.
- creditors care more about recent events. Anything in the last year or two is much more important than four or five years ago. Whatever is wrong with your credit history, time is a great healer. So the more you can speed up your DMP, the better.
- the amount of debt you have is also important – if you owe too much you won’t get offered more debt even with a great credit record! So a DMP that helps you pay down your debt is going to help in the long-term.
DMP alternatives and credit reports
Would any of the alternatives to a DMP have been better from the credit rating point of view?
Muddling along and not clearing your debt, or even seeing it increase is not a sensible alternative.
Debt Relief Orders, IVAs and Bankruptcy are forms of insolvency and all have the same effect on your credit rating. Going for an insolvency option would not have been a sensible alternative to a DMP that you will be able to finish in just a few years.
Often the problem is that a DMP may sound as though it will take a really long time at the start, but this could speed up. Say your car finance will finish in a couple of years… or your childcare costs will drop. Then it doesn’t matter if your DMP will take 20+ years at the start, as after a couple of years you will be able to pay a lot more to it.
DMPs and mortgages
Applying for a new mortgage
If you are still in the DMP, then your credit record matters when you are applying for a mortgage, but so does having debts – see Can I get a mortgage in a DMP? for more details.
Lenders are much happier to lend after your DMP has finished as your problems are in the past. And the longer in the past the better:
- if the DMP debts still show on your credit record, most high street lenders will want your DMP to have been finished a year or two years before a mortgage application;
- if the DMP debts no longer show on your credit record as they were defaulted more than 6 years before, then a mortgage lender will normally not want to see any DMP payments being made on your bank statements. So waiting 6 months after the end of a DMP may be sensible.
For most people that isn’t a problem as you will need that year or two to save up a deposit! But it does mean that you want to end the DMP as soon as you can. It is better to clear your debts fast then save fast, not try to do both at the same time which delays the date your DMP ends. longer.
Getting a new mortgage fix
If you already have a mortgage when you get a DMP, for most people you will be able to get a new fix from your current lender when your current fix ends. Even if your DMP is still running. See Can I get a new mortgage fix with poor credit? for details.
Conclusion
If your DMP is going to be short term, then you probably shouldn’t worry about the effect the DMP has on your credit rating – it won’t be great but there aren’t any better alternatives.
If your DMP is going to be very long, then you should probably be looking at how to speed it up or at the alternative of insolvency. (But be careful of IVAs because many of them fail, and if you have a house with a mortgage, you may have to get a very expensive secured loan at the end of an IVA.)
7 ways you can speed up a DMP
No credit checks for new mortgage fixes?
How much will my score change if…
Luke says
I’ve read you only get the ‘paid in full’ marker on your account if you’ve paid the whole debt and interest occured with it. Being in a debt management plan freezes all interest charges therefore I’m thinking regardless of my plan of action now whether I part settle all the debts or pay in full the balance remaining, I’m not going to get that ‘paid in full’ marker? If I paid the rememaining balance in full now would it still be marked as ‘settled for less’ because the interest has been frozen therefore the original contract with the lenders technically hasn’t been paid in full?
If that’s the case then it might be ideal to go with the part settlements with the creditors and save myself some money seeing as either option ends with the same result.
Sara (Debt Camel) says
If I paid the remaining balance in full now would it still be marked as ‘settled for less’ because the interest has been frozen therefore the original contract with the lenders technically hasn’t been paid in full?
No, that isn’t the way this works. If interest has been stopped on a debt because of your DMP, then it is not included in your balance. If you repay the balance in full, it will not have a partial settlement marker added to it.
BUT your credit record is already poor because of the DMP. So saving yourself some money may be an excellent idea as there is often little difference between “paid in full” and “paid partially”.
How many of your DMP debts have defaults added? what is the date of these defaults on your credit record?
Do you have any debts which don’t have defaults added?
Luke Stubbs says
Ok thanks for clearing that up. I realise my credit record is already very poor but I was just thinking long term and trying to repair some kind of damage and not leave any part settled markers on my file, so let’s say in 3-4 years time I have the best possible chance of being accepted for a mortgage.
There’s 5 defaults dated back to 2018 therefore I will part settle them as they will fall off in 2024 and 4 debts that haven’t defaulted therefore I will pay them in full.
Sara (Debt Camel) says
read https://debtcamel.co.uk/dmp-partial-settlement/. Unless you have the money to repay in full easily, it’s may be better to get partial settlements so (a) they are settled sooner and (b) you have more money for a deposit. There is no easy answer though, just be wary of assuming you will be in a better place if you repay in full.
Luke Stubbs says
Ok thankyou. When partial settlements are accepted, is the canceled debt/remainder of the debt classed as taxable income in the UK?
Sara (Debt Camel) says
no!
Jan says
I’d like some advice if possible…
I’ve been on a DMP for 8 years now and still have 4 years to go. A majority of the accounts defaulted so have dropped off my credit file. 3 accounts didn’t default and remain on my credit file showing DM.
Overall I’ve got £14k left to pay but only about £2k of this is from the 3 remaining on my credit file.
I’d really like to settle these 3 in full so that they will dropped off in 6 years as opposed to 10 (4 years left on DMP and 6 years to drop off credit file).
My question is: Am I allowed to settle in full with the 3 creditors remaining on my credit file? PayPlan have said this may be seen as unfair from the other creditors?
Or am I better off partially settling with all of them? How badly will a partial settlement effect my credit score?
A family member has said they will look at helping us out if we want to partially settle.
Sara (Debt Camel) says
If the money is coming from someone else, then if they say “you can have this money to repay these 3 debts” then there is nothing your creditors can do to object to this. You aren’t the one making a decision which treats your creditors differently.
BUT before you rush into this, there are a couple of other options which may be able to really help you.
First, the three debts still on your credit record. You can ask the original creditors (I am guessing that they have all been sold to debt collectors by now?) to go back and add a default date more than 6 years ago. See https://debtcamel.co.uk/debt-default-date/. If you can get the defaults added, the current creditor then has to use the same date and the debt will promptly drop off your credit record.
Second, you can look at any debts now owned by debt collectors where the original debt was a loan, credit card or a catalogue and ask the current creditors (NOT the original lender) to produce the CCA agreement for the debt. If they can’t, the debt isn’t legally enforceable in court and you can simply stop paying.
Doing these two steps will help you clear up your credit record much sooner and will probably mean you have to have less help from your relative to settle the debts.
Brad says
I entered a DMP with 3 accounts in Nov 2016.
2 marked a note on my credit file mentioning the DMP and the last defaulted.
I notice on my credit file that these accounts only mention the default or DMP start dates as April 2017.
Anyway, I have paid off all debts now early and have been debt free for between 1-2 years.
My credit rating on Experian is 11 points below ‘Fair’.
How will this look if I went to get a high street mortgage in says 1 years time? That would leave the default at 4.5 years old and the settlement date of the DMP maybe 2-3.5 years old.
Is this possible without approaching bad credit mortgage lenders?
Sara (Debt Camel) says
This time last year that would probably have been fine to get a mortgage at an OK rate. But who knows what the mortgage market will be like in a years’s time? All you can do is save the largest deposit you can and not take out any more debt.
Liz says
Hi Sara
I entered into an IVA in Oct 2018 for 5 years @ £100pm. As I understand it all my payments are now on default each month so Oct 2024 my report should be clear and there will be no mention of my IVA, is this correct? I am scared to ever take on any kind of credit ever again so how would I go about making my report look good again?
Many thanks
Sara (Debt Camel) says
See https://debtcamel.co.uk/repair-credit-record-iva/
Andy says
My partner had a DMP for several accounts starting in July 2014. All of the accounts have now dropped off her credit file except one from Virgin Credit card which is now being collected by a debt Company after being transferred to them. The default date was 17/05/2015, which seems to be too late as I read that it should be within 3 to 6 months of arrears, so should have been around end of 2014 for default date. My wife needs to open a business account now but is worried about being rejected because of the default showing. I read your article about how to challenge default dates and I wrote to the Debt Company , who said they were investigating and would reply within 8 weeks, but have failed to do so. Do we have any hope of getting this default removed and how, or do you think her business account would be accepted now ? Everything else on credit files is good.
Sara (Debt Camel) says
The record will drop off her credit file after six years – so next month. I suggest waiting for that to happen.
I have no idea if she would be accepted for a business account at the moment.
Andy says
Thank you, but am I within my rights to request that the default be removed now as the interest on the card was stopped in July 2014, when Step Change took the plan on. The default was not put on until May 2015, when the account was transferred to the debt Company. It is really important that we have the default removed before The date in May as the business application has to go in at beginning of May, and if they reject it then I presume they will reject it even when the default goes. Is there anyone I can contact ? What do you think ?
Sara (Debt Camel) says
yes, you can ask.
However there is almost no chance of Virgin agreeing to this AND updating your wife’s credit records AND the debt purchaser then making the same update after Virgin in the next two or three weeks.
Sorry, but I am just being realistic here.
Andy says
Thank you. As a last question would a bank look more favourably to opening an account for someone who has a single default with less than a month to expire or is a default as bad after nearly 6 years as at the beginning ? The mortgage and other accounts are all up to date and only a small borrowing on credit card which is up to date
Sara (Debt Camel) says
I can’t say how any particular bank will view this, but most creditors care far more about recent defaults.
Christine Watson says
Hi Sara, we have been in a DMP with Payplan for approximately 13 years and have another four years before it finishes. We are aged 68 and 75 and now have considerable health problems. Five years ago a relative left us some money and we made 40% full and final payment offers to all our creditors. All but one creditor – PRA – accepted. PRA said they would not consider less than 80% so we were forced to keep up the DMP payments. We have three accounts that are with PRA. After suffering a recent heart attack, I’m now desperate to settle our debts but don’t currently have sufficient cash to do so. Around £15,000 in total is still outstanding to PRA. We have never asked for a CCA or challenged the debt in any way. Would it be wise to ask for a CCA now, with a view to making a further settlement offer or would it add considerably to my stress, which I’ve been advised to avoid where possible?
Sara (Debt Camel) says
These three debts – what sort of debts were they, cards, loans, overdrafts or what?
Are you buying or renting?
Are your DMP payments affordable?
Surendra says
Hi, I had DMP set up with one of my creditors and now its not showing on my credit history as its more than 8yrs.
Can I open account with those creditors with whom I had DMP set up almost 8 years ago.
Appreciate for your time and suggestion.
Thank you
Sara (Debt Camel) says
Has your DMP been completed?
Is this a bank account you want to open or what sort of account?
Surendra Shetty says
My DMP is not completed and I cannot see the original creditors as they sell their bad debts.
I just need to open an current account.
I am not able to open the current account with any of my previous creditors when it doesn’t shown in my credit history.
Thank you
Sara (Debt Camel) says
so your DMP must be over 6 years old?
2 points
– you should be able to open a basic bank account with most banks, no matter what your credit history – but not a full current account with an overdraft. See https://debtcamel.co.uk/bank-accounts-after-bankruptcy/
– if the DMP is pretty old, when will it end? Have you got trapped in never ending DMP?
Surendra says
.Yes my DMP is over 6 yrs old
.okay I understood that I can open account with any other bank, but for my information can I open account with one of my previous creditor?
. well, I had to reduced my DMP so it will take more time. Is there any way to clear this DMP without disturbing my effecting my current credit score?
Thank you
Sara (Debt Camel) says
you can apply to open an account but it is VERY likely you will be rejected. Even when the DMP is finished, you previous creditors may be able to see your past history from their internal records.
re speeding up the DMP – can you say what sort of debts are still in your DMP – loans, credit cards, overdrafts, something else? How mant of the debts have doon sold to a debt collector?
Mike_p says
Hello Sara,
I didn’t think dmps showed directly on your credit report but I’ve just looked in the credit karma app and it says a debt management flag had been added to my virgin money account. Is this a new thing?
Sara (Debt Camel) says
Have a look at the TransUnion statutory credit report and see what that says.
Daniel says
Hi Sara,
Thank you for all you do and your brilliant website. The advise you give is so helpful and does genuinely help people.
I have been in a debt management plan for a number of years which I am now thankfully coming to the end of. I have had some success in having some of the loans I had removed from my credit file as they were deemed to be unaffordable following complaints to the ombudsman. However 2 of the complaints were unsuccessful and these 2 loans remain on my credit file. They do not have defaults against them but show 4 and 5 years of missed payments respectively. The loans are now virtually paid off but are obviously still having a big adverse effect on my credit file. Will this be the case for the 6 years after I pay off the loans? Is there a course of action I could take to try to have these missed payments removed from my credit file as I have paid the loans off in full? Would it possibly be beneficial or even possible to try to have the creditors add a default back when I went into my DMP so that they will drop off my credit file 6 years from that initial date?
Any advice you are able to provide would be hugely appreciated.
Daniel
Sara (Debt Camel) says
yes it’s a good idea to try to get defaults added and backdated so the records go sooner. Or else they stay there for 6 more years after they are settled.
See https://debtcamel.co.uk/debt-default-date/ for how to do this.
Neil jones says
I started a DMP in April 2022, one of my creditors Barclay card wrote to me saying my DMP payments weren’t enough to pay my minimum payment and I had arrears of £2.50 in which I had to pay by June 1 or they would issue default notice. To be on the safe side I made extra payments monthly to Barclay card when I worked overtime in work so I was paying a lot more than the minimum contract payments, but Barclay card have still put a default notice on my account even though there were no arrears on the account. Also when I check my credit file with Equifax all my monthly payments were up to date. I’m at a loss at what I should do next as I phoned Barclay card and they informed as I was on a DMP it’s the same as defaulting even though I’ve paid the contracted payment.
Sara (Debt Camel) says
Issuing a default notice has legally nothing to do with whether a default is added to your credit record.
Has Barclaycard stopped adding interest to the debt?
Neil jones says
Yes Barclay card have stopped adding interest, I’m just confused as they’ve added a default notice when the account hasn’t any arrears. I only owe them £200 and would of probably paid in full than rather getting a default notice . I’m seriously thinking of coming of the DMP at the mo.
Sara (Debt Camel) says
ok but the account only looks as though it isnt in arrears because they have stopped adding interest – you are not making the full contractual payment including interest I assume.
How large are the debts in your DMP apart from this one? Can you afford to make the normal payments with interest?
Neil says
Before I went on DMP the approx min payment was £20 to Barclay card. DMP offered them £17 a month resulting in a short fall of £2.50. That’s when they issued me a default notice saying I had to pay arreras by July 1. I started working overtime in work and I started paying an extra £20 a month Starting in may. So between what I was paying and what the DMP was paying Barclay card were receiving approx £37 a month which would cover the minimum contract payment of 5 % of balance. As to the second question I owe approx 9 thousand on DMP and am paying £487 a month. The Barclay card was the lowest of my debt on the DMP with approx balance of £300 which I could of paid off and tbh I wish I had as my credit report is now shredded with the default notice, my other creditors have accepted the DMP and put AA markers on credit file.
Sara (Debt Camel) says
that seems a high DMP payment – could you not manage the original debt repayments when the DMP started?
Where you are now, the best option looks to be to repay the DMP as fast as possible.
Mike_p says
They were very quick to default me too, but actually it was benefical as it means the account will drop off my credit record sooner.
Neil says
Barclay card have agreed to remove default but the process will take six to eight weeks.
Neil says
My intentions are to pay the DMP in the next 12 months , I earn decent salary but I just got myself into a financial mess and everything snowballed.
My original question was Can Barclay card issue a default notice when I haven’t missed any payments and have no arreras.
I’ve been on the phone them with them today and asked for a statement of the account so I can write to FCA to complain.
I think they’ve issued a default notice because they want to sell debt to a debt collector. They probably issue them to everyone on a DMP hoping they just accept it, just because your in debt doesn’t mean your statutory rights disappear.
Sara (Debt Camel) says
The Default Notice you were sent has nothing to do with a default being added to your credit record – disputing the Defualt Nitice will not remove the default from your credit record.
A lender can sell your debt to a debt collector even if they have not defaulted you – that is a red herring.
You can try to argue that you were not in arrears by 3 months when Barclaycard added a default to your credit record.
For most people in a DMP having a default added is the best thing that can happen to them – you are unusual in being able to make such large payments.
Neil says
Thanks for the information.
Neil says
Update, I’ve just received phone call from Barclay card complaints department and they have agreed with me that the default notice was wrongly added to my credit file and will remove it, saying that though the process will take six to eight weeks.
Thanks for your help . Neil
Sean says
Hello,
Do you know if I can ask my creditor to stop marking my payment as a missed payment? I am well on my way with a DMP but there’s only one on my credit file that keeps marking as a missed payment? I have 30 payments left of £300 then it’s gone.
Thanks
Sara (Debt Camel) says
Yes you can ask them to add a default back near the start of the DMP
Michael says
Hi Sara
I used the information on this site to sort out the financial mess I had gotten myself into. In 2018 I started a dmp and by 2021 all my debts had been cleared. Several defaults had been added to my credit file which are due to drop off next year.
However, I had 2 lending stream loans that did not default – instead on my credit file they show as missed payments from late 2017 until early 2021 when the dmp finished and all my debts had been paid. Both lending streams are now showing as paid and closed on my credit file. I now realise that having defaults on these accounts would have been better for me as if defaulted they too would drop off my credit file in the 2023/2024, but the missed payments will not drop off for 6 years from final payment which will be 2027.
Would it be beneficial (or even possible) for me to contact Lending stream and ask for both accounts to have defaults added to them? If so, is there a template I could use to send them?
Thanks’ so much for all the info/advice you provide on this website – it genuinely changed my life for the better! Thank you!
Michael
Sara (Debt Camel) says
how many loans did you have from lending Stream before these last two?
Michael says
Hi Sara
I believe i had 2 previous loans before the 2 mentioned.
Sara (Debt Camel) says
were the 4 loans large? the reason I am asking is that if you can win an affordability complaint (see https://debtcamel.co.uk/payday-loan-refunds/) the negative marks would be removed.
Otherwise yes, you should ask for the default to be backdated, see https://debtcamel.co.uk/debt-default-date/
Michael says
Thanks Sarah…I emailed asking them to remove the defaults but I forgot to put Complaint in the title….stupid from me!
They responded with the following:
” I see that your loans never went into default as we received payments until September, 2017 and then your loans were passed to CRS on 30th September, 2017 as you were enrolled in a debt management plan.
It’s important that the information that credit reference agencies hold is accurate and that’s why we are obliged to report it to them. Therefore, we are unable to report a default.
The missed payments were reported as you enrolled in a debt management plan and the repayments were not as per the original payment schedule.”
Do you think I should pursue this and resend my request as a complaint this time?
many thanks
Sara (Debt Camel) says
yes.
And also submit an affordability complaint. Getting defaults added can be a bit random.
Michael says
Thank you Sarah
I did submit an affordability complaint a few years ago which they immediately rejected – however, it was in the midst of covid and due to personal/family concerns around covid i never followed up with ombudsman – i just had more on my mind at the time and never followed it up.
I am assuming that ship has sailed as I believe you have 6 months to forward on to ombudsman.
I will press on with the complaint regarding the defaults and hope I get an outcome.
Thanks again Sarah
Noel says
I really want to use step change to handle the DMP but my question if it has been setup before defaults happen will it be considered payment arrangement?
what’s the criteria that creditor’s lodge payment arrangement on credit file because I also read it will be longer than default?
During the DMP, are there instances wherein some creditors will not do any defaults because of regular payments or all will just turn to default?
Sara (Debt Camel) says
The article above explains that creditors can mark debts in a DMP in different ways.
How long has your DMP been running and how many creditors have added defaults?
Noel says
DMP is less than a year. 11 creditors only 1 default atm.
Will I get away with defaults if DMP is being paid regularly?
Sara (Debt Camel) says
Ask your creditors to add defaults. It isn’t a question of “getting away with it” and it has nothin* to do whether the DMP is paid regularly- almost all DMPs are.
Noel says
Hi
I can ask for default. Can I use the contact emails in your website?
If some agree can I back date the defaults and what can I do if other refused?
If my default request is ignored, can they just use delinquent and arranged payment on my file?
Sara (Debt Camel) says
See the article above
Stacey says
Hi, I’m Autistic and struggling to understand how it all works. I’ve been told to look at step change by my energy company. Who I have £1750 debt with. I have regretfully taken out lots of credit cards, catalogues and a personal loan over the past few years. I have kept up with every single payment to date for all of those. So how would a DMP affect me if none of debts are currently behind or had missed payments.
Sara (Debt Camel) says
Hi Stacey,
ask me to clarify something if what I say isn’t clear.
The suggestion by your energy company to speak to StepChange is a helpful one.
Do you have a list of your other debts? How much do they add up to?
Are you buying or renting? Do you have a car on finance?
Stacey says
I do have a car on finance yes, but I own a blue badge and I am disabled so I’d hope they wouldn’t make me return the car. However same as other bills, it is up to date with payments. I am renting council property.
I think what I was getting at but asked it the wrong way, is, am I better of muddling through and paying them off myself (which means interest constantly added. Or even though I’m up to date with payments, do a DMP which could freeze the interest and there for be paid off sooner. I managed to have pre pay meters sorted today and I’m now paying my energy company back at £8 a week which is good.
Sara (Debt Camel) says
will you own the car at the end of the car finance?
Stacey says
Yes I will. It requires one payment of £10 for admin and then I’d be the official register owner.
Sara (Debt Camel) says
ok, car finance is not included in a DMP – you carry on making the normal payments to it. I was asking because if you had a car on PCP and woould need to get another one at the end, then that could be a problem. But yours is simple HP so it wont be an issue.
How much do your other debts – not the energy debt and not the car finance add up to – what do you owe a month and what are the minimum payments a month.
Stacey says
All my other finance agreements probably add to around £2000 which I’m ashamed to say but my ADHD unfortunately craves dopamine and I get that buy impulsively shopping, and don’t think of the consequences. There’s around 6 credit cards, 5 catalogues, and a loan with everyday loans. The credit cards some are £40 a month others are £80 a month’s. My catalogues are £70, £5, £240, so a mixture.
Sara (Debt Camel) says
how large was the everyday loan loan? and how long ago did you take it? that must have been very expensive.
Stacey says
It was £5000 loan and I took it out last year over 3 years I think it was. Can’t remember fully. I can’t remember the exact date but it was between early 2023 to mid 2023
Would the DMP serverly affect my credit score even if I’m currently up to date with all these payments? I do have two CCJS which are actually removed on the 29th January 2024. After they come off, baring my credit utilisation, my credit file will be completely clear of defaults ect.
Stacey says
Hi the loan was £5000
I took the loan around 10 months ago
Sara (Debt Camel) says
So a DMP will harm your credit record as the article above says. But you have some very expensive debt there. A DMP for everyting except the car finance will make it easy for you to clear those debts and pay the arrears on the energy debt.
With the debts in a DMP you will have more money available each month and should find it easier to manage without borrowing more on expensive credit.
I think you should talk to Stepchange about your debts and what you would pay them each month and then make a decison when you know that. See https://www.stepchange.org/debt-info/debt-management-plan.aspx
In addition you could look at making an affordability complaint about that Everyday Loan. See https://debtcamel.co.uk/refunds-large-high-cost-loans/. Winning this will speed up a DMP and help repair your credit record.
(PS your comments havent disappeared. I have put some of them together so it’s simpler to go back and read your replies)
Stacey Robinson says
I understand. Thank you. Yeah I already tried an affordability complaint. It went to ombudsman but they didn’t upheld it :( even with 3 CCJS and all that other finance I had. My last thought is, my CCJ’s disappear on the 29th of this month. Would it be worth me trying to arrange a large bank loan to pay off all my other finances and then have one lump sum.
Also for example say one of my credit cards, I wanted to keep for future for emergencys, once this has been placed in DMP and been fully paid off, would it still be usable at the end of the plan? Thanks.
Sara (Debt Camel) says
well you could try. But with the car finance outstanding, your bank may not want to lend a lot to you.
Once all your debts are gone, you may be able to get a new credit card if you want one then.
I’m not saying a DMP is right for you, that needs a debt adviser to go through everything with you. But I think it would be useful for you to talk to StepChange, tell them you are autistic and disabled, they are very nice.
Neil jones says
If your not behind on any payments then stay clear from dmp as it will badly effect your credit file, it effects your credit file as you probably won’t be making the contactable payments on your debts so you’ll fall into arrears which will result with default notice on your file. I went on one and once I seen my credit score lowering I soon got off it. They are good if your credit file is already trashed but yours isn’t.
Sara (Debt Camel) says
She is living in a council property, has large arrears on energy bills, 3 CCJs and some very high cost debt. I don’t know what you regard as a “ trashed” credit record but hers is very poor.
jacky says
Hi.
I Am very confused. I have a lot a debt and already missed a few payments. I am considering going into a DMP for about 15 years for very little a month. Someone told me that if you get a default on file at the beginning of the DMP then after 6 years my credit report will be clear with no sign of default or DMP even as i will still be in a DMP for another 9 years . Is this correct? Thanks. Jacky
Sara (Debt Camel) says
Yes that is right. Defaults drop off your credit record 6 years after the default date, even if you are still paying.
This applies to all defaults, it isn’t something special for DMPs.
But even though your credit record may improve a lot, you still have to keep paying the debts in the DMP, or a creditypr may take you to court for a CCJ, which would hurt your credit score for another 6 years.
A 15 year DMP is very long. But it may be possible to speed it up. See https://debtcamel.co.uk/7-ways-to-speed-up-a-dmp-so-it-finishes-sooner/
jacky moiman says
Thanks. What about the DMP will that also disappear from my credit report after 6 years even so i am still paying it, as i defaulted in the beginning?
Sara (Debt Camel) says
A DMP doesn’t itself show on your credit record, not like an IVA.
Deena says
Hi,
I have agreed to pay a set amount with one of my credit card lenders, £60 per month (I intend and can afford to pay £100) to clear the debt faster. It has been marked arrangement to pay on my file. Im also on a payment holiday for another 2 credit cards, which I intend to also ask to pay an agreed amount at the end of the holiday which is this month.
There are no defaults on my accounts, I can afford all of my minimum payments to all of my lenders, but I feel like I will be paying for years just making the min payment. With the payment agreements interest has been frozen so I have worked out I can be debt free in approx 14months.
I have been also been advised to contact step change as I have £400 arrears on my gas/electric bill. I do have a direct debit set up for my current/future costs for £236.
I am trying to do the least damage to my credit but trying to clear my debt asap. Would my Arrangements to pay, impact me getting another PCP in 18months time when my current finance ends (again no missed payments)
Sara (Debt Camel) says
I do have a direct debit set up for my current/future costs for £236.
How much of this is to clear arrears and how much is for current usage?
The PCP – how large is the balloon payment? When did you take this out? Have you had other car finance before this?
Craig says
Hi Sara,
This site has helped me a lot. Thank you so much for your efforts! Last August, I completed a 6-year DMP with Step Change that started in September 2017. I’m now patiently waiting for the defaults to drop off so I can move on with life. Sadly, some defaults were not added until 12 months AFTER I started my DMP, which is annoying to say the least. I wrote to PRA who took over one of the debts to request a change in default date, and they informed me that MBNA (who I had the original credit card with) were happy that the default date of August 2018. I suspect this is because what StepChange were paying MBNA was enough to cover the minimum payment. Should I push back at PRA group, or go to the ombudsman?
Also, I’ve used Checkmyfile to look at all my defaulted accounts status with Equifax, Experian and Transunion. On a few accounts, the default dates are all different. For example, on one of my old credit cards, the original default hits 6 years this June with Experian, but the same account doesn’t hit 6 years until October with Equifax and December with Transunion. Will the default drop off my account in June, or will I need to wait until December for that account to disappear off my record?
I detest the way credit scores have become gamified and how things are reported so differently. across them all. Thanks for helping us all out with practical, real information.
Kind regards,
Craig
Sara (Debt Camel) says
If you want the default date changed on that PRA debt, you have to get MBNA to add an earlier one. Then PRA will have to use that.
Each CRA will remove the debts according to the default date it has. When they all have different ones, you need to complain to the original lender and ask them to change the other two default dates to be the the same as the earliest one for that debt.
Craig says
Thank you Sara – it’s such a joke how they all work so differently and how things are reported. I appreciate your advice and will write to the various CRAs to request the changes. Thank you again.
Sara (Debt Camel) says
don’t write to the CRAs, I didn’t say that, write to the original lenders. Writing to the CRAs is a waste of time
Craig says
Hi Sara – sorry, I meant original lenders. Thank you!
Kateryna says
What impact does a debt management plan (DMP) or payment arrangement have on your credit rating, and how does it compare to other debt solutions in terms of credit score recovery and long-term financial implications?
Sara (Debt Camel) says
You don’t seem to be based in the UK, can I ask what your interest is?
Anna says
Hi,
I’ve approached Step change about my current debt and I have been recommended a DMP plan which over 4 years should pay off my outstanding debts, which I’m currently paying in full but finding I’m having to work (unguaranteed) overtime each month to do and therefore becoming more and more anxious.
My debts are: 3 x credit cards (£9000, £2000, £2500) 2 x store card (£2500, £800),
I have a mortgage and a own a car outright and I am not behind on any payments.
I’m concerned that a DMP will affect my credit to the point that any future remortgage agreements will be denied or impacted negatively, and I’m also concerned that the debt will be passed to organisations that will harass me for the payments.
I’m also really really concerned that as I work for a bank (I am not in a regulated role – customer service) that this will be picked up by employers who may decide I am too much of a risk to be employed by them?
I’m really worried a DMP would be foolish to get involved in, but I am also really concerned that I am not going to be able to maintain the payments I am currently making, and just want to feel like I am able to get some control back.
If I don’t plan on getting any credit in the future, and my home is my only financial loan (mortgage) would the DMP be the right solution?
Thanks
Sara (Debt Camel) says
Who is your mortgage with?
Alexandra says
Hi Sara,
Everything on your website has been so helpful to me in the last few weeks.
I have decided to contact StepChange in setting up a DMP and they have applied for breathing space for me for the next 60 days. I have just over £26k in non priority debts and plan to pay £300 a month to have them cleared in just over 7 years.
First question: Can I contact my creditors while I am on breathing space and offer them a nominal payment until the DMP kicks in? StepChange have suggested I don’t just stop paying as that may annoy them. I have never missed a payment ever on any of my lines of credit
Second question: when is the best time to make affordability complaints? Should I wait until all have accepted the DMP?
I have 4 creditors in total – monzo, NatWest, PayPal credit and Very catalogue. I believe I have a good case against all but I have heard PayPal may be untouchable due to the age of the account and leaving EU since. Monzo gave me a personal loan/flex credit card and overdraft all within 4/5 months. NatWest gave me a personal loan and credit card within 4 months. Very would repeatedly increase credit limit by large amounts even though account usage was very high.
Sara (Debt Camel) says
I would say just stop paying:
-it is much simpler and less hassle for you
– it helps you build up a small emergency fund
– it encourages lenders to default your debts quickly – this means your credit record becomes clean sooner.
And your creditors do NOT want a token £5 from you for two months. It will cost them way more than £10 to take your phone call/deal with your email and set this up. That is not a sensible suggestion.
If you are contacted by a creditor (which is very unlikely in a breathing space) just tell them you are talking to StepChange about a DMP and you expect it will be running in a couple of month or two.
Start the affordability complaints now.
Has Paypal ever increased your credit limit? When?
You also need to get a new bank account if Monzo or Natwest is your bank. Get an account with someone you don’t owe month to, move all the income and the household bills and any debts not in the DMP over to there. Then cancel the DDs from
Alexandra says
Not paying is much simpler for me. I assumed this would have been the case anyway but the person at StepChange said it could be better to offer a lower payment.
Monzo and PayPal have both been in contact to acknowledge the breathing space and monzo have taken away the option to make payment/PayPal have said they won’t be taking any payments.
PayPal did increase credit limits in October 2016, April 2022 and March 2023. Each time by £1000 despite being almost maxed out each time.
I have set up a basic bank account with virgin money and I am in the process of moving all my DDs not associated with the debts over
Sara (Debt Camel) says
The whole point of breathing space is to keep things very simple.
Paypal – you can definitely complain about the last two credit limit increases. Complain about them all – let the ombudsman sort this out. even if you can only get a few hundred off the balance, that helps speed up the DMP.
It sounds as though you are getting well organised. You may also want to think about setting up a separate account for spending, so that isn’t mixed up with the household bills. And think about where you will keep an emergency fund.
The trick to living in a DMP with little stress, is to put aside money each month that is in your DMP budget but which you haven’t spent. So there should be money in their for gifts/xmas. Clothes. Car costs (if you have a car). Put that money aside if you don’t spend all of it in a month, so its there when you need it.
Do you have a car on finance?
Alexandra says
Ok. I will send a complaint to PayPal as well.
I had already began to get in touch with monzo RE a nominal payment but I’ll get back in touch to tell them to forget about it?
Good idea about having a different account for spending money. I’ll get on that as well.
I currently own my car outright but it’s very old and always breaking. I am hoping to get a new car through the motability scheme soon as my brother is on high rate mobility and it doesn’t involve any credit. He should be able to nominate me to get the car in theory
Sally says
I have a question about AP markers.
I have a question about AP markers that are on an account for a few months and then normal payments resume.
Last year I lost my job and called my credit card companies (4 of them), my bank Monzo (I have an overdraft and Flex facility) and also Very to ask for help. All of them agreed to reduced payments for 3-6 months with frozen interest and at the time I thought this was fantastic. I managed to get a new job but it was much lower salary wise and I am currently trying to figure out the best way forwards as I am trying to get debt free.
Will the AP markers that were there for 3-6 months last year still only drop off six years after the account is settled, or six years from when the AP marker last appeared?
Sorry if this doesnt make sense, Im just assuming most of the articles written about this deal with situations where the debt is paid off during a continuous ‘AP’ period.
Sara (Debt Camel) says
A debt that isn’t defaulted will drop off 6 years after it is settled. Whither you carried on making Apps or went back to “normal” is irrelevant.
If you new Job is a lower salary you should consider a debt management plan.
Sally says
Hi, thank you. I guess my question is more do the AP markers that were there for 3-6 months last year still impact me credit file after if the accounts remain active? For example my bank account with monzo if I clear the overdraft. Or is it 6 years after the AP markers last appeared they would no longer hurt me? Im able to potentially clear my debts in about 5-6 years myself without using a DMP so I would prefer this but I have realised if these AP markers will continue to haunt me for a further 6 years after the debts have been settled I may be better off letting those accounts default asap.
Sara (Debt Camel) says
Yes they are still harming your credit score now you have gone back to normal payments. The debt will be deleted from your credit record 6 years after you settle it if there is no default.
A default harms your credit score more but drops off sooner.
Sally says
Thanks Sara and sorry if I am coming across dense, but I am still a little confused about something. I think Its because my AP markers (so far) are only for a 3-6 month period on my report and I am unsure what that means for me. \
So, would the above still count if the AP markers were more than six years ago by the time the debt is settled? For example AP appears on my report for a credit card ONLY during the months of September-December 2018 and I clear the credit card debt entirely in February 2025. Would that settled account show an AP marker until Feb 2031? If that is the case it seems absurd to me, but also means I think I may go down the ‘letting accounts default’ route because these AP markers are going to cause me more trouble in the long run :(
Sara (Debt Camel) says
Ok, they shouldn’t affect your credit score after 6 years. But they are still on the credit record and lenders do not use the credit score that you see. I would expect the effect is negligible if the debts have been settled by then.
But the risks here are to the downside. If it takes longer to clear the debts you pay More interest. You budget that has you clearing the debts with interest in 5 years – have you allowed for car problems? Dentists? Vet bills? Holidays?
Sally says
This is why I am confused as I keep reading an AP marker is almost worse than a default in the sense it will continue to affect lender’s view of you a further six years after the debt is settled. Is this not the casse? I just think its quite unclear what the exact mechanism of an AP marker is (if the account hasnt defaulted).
I suppose you are right re my budget for clearing alone, maybe some last minute issues that crop up cant be paid for. It will be a stuggle but I am desperately trying to avoid this nightmare going on for longer than six years and the AP thing seems to be so poorly understood (by me too).
So I have a choice between a DMP (where it isn’t guaranteed accounts will default whilst on the DMP) and these AP markers will haunt me for 12 years, due to everything taking around 5-6 years to settle. Or letting everything default in the next 3-6 months and then arrange separately with lenders if possible. Or sticking to my plan and trying to clear myself in 5 years not fully knowing if that will be worse because, again, the AP markes that are already there will still cause issues once the accounts are settled.
Sara (Debt Camel) says
Theses things are always unclear as lenders do not use the credit score you see. And they do not all have the same approach. Some lenders may care about old payment arrangements, many will not. There is no simple “mechanism” to explain. If you want a DMP to be sure to get defaults early, stop paying them for 3 months then set up the DMP.
Why not talk to StepChange now about what you would pay in a DMP? StepChange aren’t pushy, it’s up to you to make the decision, but knowing the fact about what you would pay is a useful piece of information in making a decision.
Sally says
Thanks Sara, I know they don’t look at a “credit score” and didn’t mean to imply that they did sorry. I did speak to step change and DMP for 6 years was the most comfortable option for me. But then I did some research and I’ve seen so many horror stories about this meaning an AP marker (not default) on some accounts meaning you’re worse off. And lenders may not oblige in adding defaults even if you ask. So I think the “DMP once defaulted” is best for me especially since some accounts have temporary AP markers already :(
Sara (Debt Camel) says
As I said, the simple way to get defaults added faster is to stop paying for 3 months. Then set up a DMP with StepChange.
Stefan says
Hi Sara,
I have a dmp with about 4 creditors.
I defaulted around 6 years ago so all but one has dropped off my credit report.
The one that has never been passed on and is still held by the high street bank has just reported a “new credit file” to my name with the details . Can they do this?
Thanks
Sara (Debt Camel) says
What do you mean, a new credit file? Had they previously added a default?
James says
Hi Sara
You helped my quite a lot back in 2018/2019 & I wanted to say thank you!
I also have a question about these markers, I never entered a DMP at the time as I was happy to make my own AP with all of my debtors.
Out of circa 60 loans I only have 2 left on my credit file which are due to fall off this year, One of the loans has AP markers on it dated from Sept 2018 – November 2019, When this gets to 6 years since being closed (this November) will the AP markers be removed along with the loan ?
I’m just questioning this as you mentioned 10 years for AP markers in your blog & wanted to double check that these aren’t showing somewhere else on my credit file
James
Sara (Debt Camel) says
No, that will drop off. If you had started the arrangement to pay a few years earlier in 2015 and still finished in November 2019, those AP markers would have been on your file for 10 years.
James says
That’s great, looking forward to the remaining negative markers dropping off this year
James
Rob says
Hi Sara,
I am mid-divorce and our house sale has collapsed twice.
Part of our financial order has been that I assume all of the joint debts for a clean break.
We actioned the financial order of the divorce as we were days away from exchange and completion.
Then the house sale stopped, I have all the debts in my name, and I never expected to service all of them on my own.
I am a high earner but my debt payments are almost a third of my take home pay, then there’s my living costs and child support.
I’m considering a DMP to cover all the debts and reduce the amount I pay each month. I would repay the DMP as soon as the house sells.
My concern is that the DMP feels like a sledgehammer to a cash flow problem that could be sorted in a few months.
Alternatively, get the DMP started, pay it off within 3-6 months and then get on with recovery – but it feels like along shadow that may impact future relationships and house purchase.
StepChange have been brilliant and a DMP there would be £750 a month as opposed to the £2500 I pay on repayments currently.
Paying the loan payments, child support and my living costs means that I am constantly having to sell things or juggle money in month to make it all work. What’s your advice. I could muddle on for a few more months but it is highly highly stressful.
Sara (Debt Camel) says
I suggest you look at options such as switching the mortgage to interest only for 6 months. Usually a very bad idea, but not with a house sale coming up that will clear so much debt