Debt Camel

Answers to questions about debts and credit ratings - in plain English!

My DMP is ending – will my credit score improve?

A reader asked in a comment on my article on How does a DMP affect your credit rating? :

“I have 6 months left on my DMP and I know my credit rating is rubbish. Will my rating improve once this is paid off?”

That’s a simple question, but it needed rather a long answer. This article is for people who are near the end or who have already completed their Debt Management Plan (DMP) by repaying their debts. If you are thinking of starting a DMP, or are in the early stages, the link above is more relevant, as it looks at what your different options are.

First, well done on being so close to the end of your DMP!  Although your credit rating may be bad now, it will improve and this has sorted your debt problem without the more permanent harm insolvency does to your chance of a future mortgage. You also have the satisfaction of knowing that you have paid back every penny you borrowed.

But it’s understandable now that your thoughts are now focusing on your credit rating. Even if you don’t want to rack up the credit card balances again, a good credit rating is useful if you want to rent a new place or buy a car on HP. And it’s essential if you want to get a good mortgage offer.

How are your DMP debts showing?

There are two ways a creditor can treat a debt in a DMP:

  1. the debt may be marked as “AP”, this stands for “arrangement to pay”.
  2. the debt may be marked as “defaulted”. (You may see a string of defaults, one a month, but you can ignore these. The only one that matters is the first default.)

Some creditors may have gone the AP route and some may have defaulted the debt. And some may have originally used an AP marker than later added a default. It can be confusing, so it’s important to know exactly what your credit records say.

You can check your credit record for free using Noddle, but I recommend checking all three credit reference agencies if you are serious about finding out what is happening.

What happens at the end of a DMP?

When your DMP is completed, all the debts should have a zero balance because you don’t owe anything. They should also be marked as settled (if they haven’t been defaulted) or satisfied (if they have been defaulted).

Creditors update credit records once a month, so allow five or six weeks from the last payment before seeing if all your debts to have been updated. There normally isn’t a problem here, but if one isn’t updated to zero, check first with your DMP firm when the final payment was made. Then contact the creditor and ask why a balance is showing.

Problems such as defaults and payments in arrears matter less as they get older, see How much will my credit score change if… ? for some examples of how this works. There isn’t a huge jump the month after your DMP finishes because the debts in your DMP are still showing. But as the DMP becomes further in the past and as you start to get new “positive” marks, your credit score will improve more.

How long before the DMP debts disappear?

This depends on how the debts were marked:

  • a debt with an AP marker and no default will remain on your credit file for six years from the point at which it is settled.
  • a defaulted debt will remain on your credit file for six years from the default date. If your DMP has lasted more than six years, you may find that some debts have already gone!

Up until now you may have been pleased that a debt wasn’t marked as defaulted, because an arrangement to pay doesn’t sound as bad. But defaulted debts are going to disappear before AP debts, so you may be wishing they had all been marked as defaulted…

Sometimes you can get this changed as the creditor has not put the correct default date on. Read What should the default date for a debt be? – that explains what the “rules” are and how to ask for a default date to be added, or changed to an earlier one.

If this works, it can make a big difference to the time it takes for your credit score to improve.

Three ways to speed up credit file improvement

These will help your credit score to increase faster:

  1. “Good housekeeping” Make sure all the personal details on your credit records with each of the Credit Reference Agencies is correct: your address and previous address; no financial links with an ex; keep things generally stable, not chopping and changing accounts more than necessary; and be registered to vote (surprisingly important for your credit score!)
  2. Make every payment on time Be fanatical this is for the next few years – you are going to kick yourself if after 18 months hard work getting your score up you pay one bill late over Xmas. Set up as many payments as possible to be by direct debit so you can’t miss one – this includes gas, electricity, water and phones, not just “debt”. Be especially careful when you are ending a mobile contract as this is an easy one to miss – double check with the mobile firm that you don’t owe any more and keep/print out your last bill showing a zero balance.
  3. Start getting “positive marks”  Get a “bad credit card” and use it every month for some small routine spending and pay it off in full every month. Use this soft search tool to see whether you will be accepted for a card – you want to avoid rejected applications as they leave a bad mark on your file. These cards have horrible interest rates, but they are a great tool if you stay in control, see How to avoid the bad credit card traps for details. Getting a mobile contract is also a good idea – it’s another regular monthly “tick” being added to your credit files.

What are your priorities?

At the end of a DMP, you must have a long list of things to spend money on: treats for the kids, a holiday, new carpet etc. Take a few months off and celebrate… but then think about your long-term priorities:

  • a good emergency fund will safeguard your future – every month save part of the money you were paying into your DMP in a place you can’t dip into easily. A Credit Union account could also help with affordable borrowing if you ever need it;
  • mortgage – start to overpay it if it is a repayment mortgage or get a repayment plan if it is interest only;
  • put more into a pension – if you aren’t contributing to a pension fund, find out if your employer will add extra contributions.
More Debt Camel articles:
7 reasons why a sales bargain may not be a good buy

7 reasons not to get a sales bargain!

Options for repaying an IO mortgage

Options for repaying an IO mortgage

Debt free – what will you do now?

Comments

  1. I must say I would have to question this statement.

    “this has sorted your debt problem without harming your chance of a future mortgage through insolvency. You also have the satisfaction of knowing that you have paid back every penny you borrowed.”

    Most lenders are not going to touch someone just out of a dmp. You can count on one hand the ones that will.

    A lot of people coming out of dmp will struggle to get a decent mortgage for a number of years. The old defaults (in the majority of instances) will highlight the previous problem.

    Good blog though.

    Mark

    Reply

  2. Hello, I got into a lot of debt around 2004. I entered a debt management plan never missed a payment at all. They settled all accounts in 2012 or earlier. There were many defaults on alot of accounts a few years back. I have recently done credit checks and only have one default left which was issued in March 2010. I know this default is due to come off in March 2016, This was for a Lyods TSB credit card The defaulted balance was £2480 and this was settled on 31/03/2012. Again the default was put on the account on March 2010 so how will this affect my credit report come March 2016? Will this all still show as the account hasn’t been marked settled till March 2012? Just wondering as this account still shows all issues back to 2006 on my experian credit report. This is the only issue on any of my reports and I was hoping to apply for a mortgage later this year thinking the default will gone this March but am now wondering if it will still show since the account has not been marked settled till March 2012. Many thanks, Jim

    Reply

    • The simple answer is that if there is a default of March 2010 on a debt it is going to disappear in March 2016. It doesn’t matter what date you settled it.

      The default date sounds very late, you could probably get the default changed to be earlier, but as this would take a month or two it’s hardly worth bothering with!

      Good luck with getting your mortgage later this year!

      Reply

  3. I have a very poor credit score so unfortunately myself and my partner could not get a Morgage as I have a number of defaulted accounts I owe £2500 so have decided to just pay them all of with the help of my partner we were then told if my credit file is clear of debts for a year there shudnt be a problem in getting a Morgage I hope this is true as I am so worried any advice would be much appreciated thanks Shirl

    Reply

    • This article on getting a mortgage after a DMP may help: https://debtcamel.co.uk/dmp-mortgage/. Some lenders will consider you if the defaults are all older than 3 years and all paid off more than a year ago. But you need to talk to a broker, not just apply to high street banks.

      Reply

      • We are hoping to have them all paid of in the next 4 months keep my credit file clean and go back in a year I hope then they will accept us ??

        Reply

        • That sounds like a good plan, but as i said, go to a broker not direct to a high street bank!

          Reply

  4. I have a question……
    I went on to debt management in November 2010, I have now paid of every penny in full and all my accounts have been marked as paid in full. does this mean that November 2016 they will not affect my credit rating any longer? and subsequently my credit rating will go up?

    Reply

    • The date the DMP started is irrelevant, what matters is the dates the individual debts were marked as defaulted – the debts will disappear 6 years after this date. This could have been before or after your DMP started. If you think a default date looks too late, read https://debtcamel.co.uk/debt-default-date/

      Reply

  5. Hello,

    I have a question.

    I am about to enter a Dmp which will last 10years. Most of my creditors have already defaulted any accounts. Will those dissappear completely after 6 years regardless of me still paying the DMP?

    If so what is the point in me struggling to pay the DMP if they will dissappear after 6 years anyway? Other than knowing I will have paid every penny.

    Reply

    • Yes, they will disappear after 6 years, regardless of the DMP.

      If you don’t get a plan to repay the debts, the creditors may go for CCJs after a few years which would wreck your credit record for another 6 years.

      Have you looked at your other options? Are you buying or renting? Do you expect your finances to get better or worse over the 10 year period?

      Reply

  6. Hello,

    Thanks for your response.
    That explains what I needed to know. I will be returning to work this year so my income will increase however I will then have to pay childcare fees for a few years, the cost is actually more than my earnings, so this is an expected negative.
    I’m currently renting, wanting to hopefully buy in the future. I am 23 and want to completely repair my credit file for then. I have looked at other options. I do believe I qualify for a DRO however my partner doesn’t want to participate in one of those. I am on unpaid maternity leave, he is working. We do claim working plus child tax credit. Can I ask, if I was to apply for a DRO what income would they take into account? Would it be all of my partners too? He is not self employed however he has no contract and only gets paid for the work he does, which isn’t stable and varies quite a lot.

    Reply

    • Your partner doesn’t have to “participate” in a DRO, his income is only taken into account to makes sure you are only paying a fair share of the bills.

      A 10 year DMP is too long. if you qualify for a DRO then that us going to be Much the best option – your credit will be wrecked but for only 6 years. In a DMP you couldn’t get a mortgage until after it ends. An IVA with no assets to protect is pointless.

      Reply

      • Okay yes that makes sense. We are sharing the bills, if not him slightly more. Will his spare income not be taken into account, after he has paid his share of the bills? currently after bills/essential living costs I have ‘less than £50’ I just want to make sure his income won’t be included in this? Making my disposable income higher…

        Reply

        • No his disposable income doesn’t count. Talk to a debt advisor who sets up DROs, they can go through how this works in detail.

          Reply

  8. Hi
    I am currently in DMP which sets to last untill 2033!! Debt is £20k various cards & loan. Defaults are showing from 2014. I am about to go on maternity leave, shall I continue as I am or look into getting an IVA or can you recommend anything els? I was just thinking that after the 6 years of defaults my credit file will be clear and I would hope to go for a mortgage ? Is this pie in the sky am I best off doing s more formal arrangement and get the debt paid to do quicker? Thanks

    Reply

  9. My husband and I entered into a debt management plan mid 2012 with various defaults going onto our credit files between August and December. We managed to pay over £40K back and came out of our DMP in February last year. We are now looking at buying a bigger home in 2019 if possible. Would our credit files to be cleared then to look for a mortgage or would we require to go through a broker? We do have savings and equity in our house to go towards the purchase but worried that this will effect our chances of moving on with our future. Thanks

    Reply

    • If the defaults went onto your credit file between Aug & Dec 2012, then they will all disappear in 2018. Leaving you free to apply for a mortgage in 2019. You should avoid applying to anyone you owed money to in the DMP.

      Reply

  10. Thank you, delighted that we will be eligible to apply for a new mortgage without the past being brought up to haunt us. How quick would our credit score jump up to Green rather than the amber colour we are currently at once our defaults clear? Thanks

    Reply

    • That depends on what else is on your credit file but if there are no remaining defaults or CCJs then there should be an immediate improvement.

      Reply

  11. Our debt management scheme ended in May 2016. We are rebuilding credit using high interest cards, ensuring we pay in full each month. We have been investigating our credit reference agency records and discovered that three of the four creditors registered defaults in the year the DMP started, the fourth went down the arrangement to pay route and did not register a default, we were not aware of this when the DMP was set up. We have contacted Barclaycard by letter and telephone to ask them if they will register a default and convert the AP to DMP. Their response has been that this was the company policy at the time (2011) and nothing can be done about it now. For some reason they did record the last seven months of repayments as DMP instead of of AP.
    Is there anything that we can do about this given their negative response?
    Thank you.

    Reply

  12. Thank you Sara. The letter I sent to them was detailed and specific, and I did ask Barclaycard to explain why they could not register a default if this was the case. Their written response was not at all detailed and effectively said: we have provided the correct information to the credit reference agencies. The information about company policy being applied was given in a telephone conversation with one of their customer service representatives. Whilst she was polite and seemed genuinely sympathetic to our situation it would appear that we need to increase the level of assertiveness in order to obtain a favourable response. I will resubmit the original letter with the addition of the complaint and reference to the ICO guidance you have provided. Thank you for your help.

    Reply

  13. My DMP , which I took out over 6 years ago, will finish in a few months’ time. Over the years I have regularly received default notices from my creditors despite making regular payments. My DMP company informed me that this was normal. However, my most recent one was posted to me only a few weeks ago by a company which had ‘bought’ the debt. Contrary to my understadning from this site, i.e. that only the first default date should count, my credit record still refers to current default dates. Also, my DMP company told me that every time I would receive a new default notice it would take another 6 years to wipe it off my credit record.

    Any clarification and advice as to what to do to clear up my credit record would be much appreciated. Thank you.

    Reply

    • The debt will disappear from your credit record 6 years after the first default date that is marked on that debt. I suggest you look at all your debts on your credit record and note down when the first default date is.

      The article above has three things to do to help improve your credit record.

      Reply

  14. Hi I’m currently in a DMP but it should be paid off by sept 2018. There are currently 2 defaults on my file from sept 2015. After this is paid I will not owe any money to anyone. Myself and partner are hoping to get a mortgage in 2019/2020. What do u think the chances are? After the DMP has been cleared I want to spend a year trying to improve my credit. Will this help? Thank you

    Reply

    • Are you already saving for a deposit? You will probably do better by repaying dmp faster, then saving more quickly.

      Reply

  15. Dear Sara,

    I was ono a Debt management plan and completed it successfully. However my credit card lender Barclays left with status of “AP” until 2016 and after that it was sold to another lender, Now it says on credit file as “Settled” and it is still showing up on my account, I went on DMP in 2010 and completed successfully.
    I went thru credit files and found my rating with equifax as in Fair with a score of 418, and experian as 999 and noddle as 628.
    I tried to check myself by applying a loan and I had only “2” lenders in soft search and when I went with one of them I got a different interest rate and finally I got a letter saying loan is not approved as underwriters not Ok.

    What is the situation here with regard to my profile and what measures/ actions required at my end to have a good profile and to have a normal life like others.
    Regards,
    TVR

    Reply

  16. Hi Sara,
    Forgot to mention that in 2016 this account was sold to Link financials, Should I still go ahead and speak to Barclay card or I should ask this to Link?
    Also this “AP” status was until 2015, and from 2016 – I see in file that all Green without any flag of “AP” in credit records and shows settled with a recent date.
    What you suggest on this entire subject, many thanks for your valuable help and inputs, I spoke to barclay card and they asked me to contact them next friday and they will look at my account. What they said was it was sold to them and we dont control this account and as you have settled you should be fine.

    Regards,
    TVR

    Reply

    • If you want a default date added before they sold the account (and you do) then you complain to Barclays. Link then have to use the same default date as Barclays did.

      Reply

  17. Hi Sara , thanks for writing this article and all the responses above – very very helpful. I have been on a DMP since 2016 and having just secured a new salary have upped my payments considerably meaning I will be done in 1.5 years rather than 6. This has me thinking seriously about my credit score and what I can do to repair it – it’s currently at 162 which is very poor. Realistically what would I need to get it up to to get a mortgage? Does the fact my gf already owns a property and commands a high salary help or will I still be viewed as a liability? Thanks in advance P

    Reply

    • You score actually doesn’t matter that much for a mortgage. Read https://debtcamel.co.uk/mortgage-recent-defaults/. Your aim has to be to pay off the DMP as soon as possible and the look for a mortgage about a year after that point. Then there will be high street lenders who won’t “see you as a liability”. but go to a broker, not direct to a lender and – of course – avoid lenders you have defaulted to. So if there is a Barclaycard in your DMP, cross Barclays off the list!

      Reply

  18. Hi Sara,

    I started my DMP back in 2011 and it is due to end in the next two months. Barclays decided to put this as a default and appears as a default every month for the pass 7 years. Is this correct? Or should this have only defaulted when I first started the plan?
    Will this be on my credit file from 6 years of finishing the DMP or should it be 6 years from the first default?
    Thanks

    Reply

    • Once a default has been added to a debt on your credit record, another one will be added every month even if you are keeping up with the DMP payments. Even though this looks bad, the later defaults don’t matter, they aren’t counted in your credit score.

      The debt will disappear six years after the first default date – can you check your credit report again, as if this was more than 6 years ago, the debt should have gone already?

      Well done on having repaid all your debts!

      Reply

  19. Hi Sara, I find this a very interesting read, I am just curious and apologies if it has already been asked, could you tell me what these abbreviations mean on my credit file are they the same as mentioned above? What effect do they have? Will they take 6 years from the date of the first one applied to ‘drop off’?
    AR
    DF
    OK
    UC
    ST

    Thanks,

    Reply

    • AR – arrangement to pay. This debt has not been defaulted and it will drop off 6 years after it is settled
      DF – defaulted – will drop off 6 years after the default date
      OK – not behind with payments. It will drop off 6 years after the account is closed.
      UC – new entry – no data yet
      ST – settled. This debt has not been defaulted so it will drop off 6 years after the settlement date.

      If the AR or ST debts were in a DMP, you may want to think whether a default should have been added as this will make those debts drop off sooner. See https://debtcamel.co.uk/debt-default-date/.

      Reply

      • Thanks Sara, so just to clarify for example one of my debts shows the following on my credit file;
        STAT U S H I STO RY
        Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
        2018 OK OK OK
        2017 OK OK OK OK AR AR AR AR AR AR OK OK
        2016 AR AR OK OK OK OK OK OK OK OK OK OK
        2015 OK AR AR AR AR AR AR AR OK OK AR AR
        2014 OK OK OK OK OK OK OK OK OK OK

        Am I right in thinking I should request for a default to be added to this around February 2015 so it will drop off sooner? I clearly defaulted because stepchange advised me not to pay my debts and they would arrange a payment plan and im pretty confident I received a letter around this time to say they would have to default my account in order to arrange an arrangement to pay. Does that make sense ?

        Also on one account it has ‘DT’? any ideas? And another has ‘AA’? And another ‘BB’?

        Again thank you for your help

        Reply

        • The debt you have listed the history for – are you currently paying this through a DMP? When will it be cleared?

          Feb 2015 is unlikely for a default date as that is the first time you didn’t make a full payment. Also it then goes back to OK – so were you making quite large payments to this in your DMP?

          A Feb 2015 default will be there until Feb 2021, if the debt will have been settled well before then this may not be an improvement.

          DT = dormant account
          AA early stage arrears 1-2 months late
          BB sustained arrears 3-6 months late

          Reply

  20. Hi Sara,

    Firstly, thanks so much for your really easy to follow information and tips. I have a question about credit that is paid off within 6 years. I heard somewhere that if credit is taken out and repaid in full, that it is then removed from your credit report that month, rather than 6 years later. Could you clarify if this is accurate (or anything like it). I have a PayPal Credit account that will be paid off within 6 months and was curious.

    Also, where do I go on the site to find out more about how long late payments matter on reports for, I know they stay showing for 6 years, but do they matter as much after time and if so, how long?

    Look forward to hearing from you.

    MM

    Reply

    • “I heard somewhere that if credit is taken out and repaid in full, that it is then removed from your credit report that month, rather than 6 years later.” no this is nonsense.

      The only unusual case it does apply to is if you get a CCJ in court – then if you pay the CCJ within a month it is deleted from your credit record.

      But for debts, they will stay for 6 years from the default date if there is one, or 6 years from the settlement date if there is no default date.

      See https://debtcamel.co.uk/credit-score-change/ which looks at how defaults matter less as they get older – the same applies to late payments.

      Reply

  21. Hi Sara
    I have finished a Dmp recently been on it for about 5 years made my last payment on the 23rd July which was a final figure which I checked with pay plan settled it and at that time they said my plan was completed during the plan time I kept on getting statement letters from one of the creditors Halifax credit card I just thought this was automated and discarded them every month about 3 weeks after my final payment I got another letter from Halifax with an outstanding balance. so I wrote to them asking if my balance was paid in full saying I have just finished a Dmp and to stop asking me for payment. I have spoken today to a complaint manager from Halifax saying I have an outstanding balance of £166 not sure what to do now as my case with pay plan is now closed

    Reply

    • Ask Halifax for a statement of account for the debt. Also ask Payplan if they can confirm what they paid to Halifax.

      Reply

  22. Hello,

    I went onto a debt management plan in April 2010 and paid it off Feb 2018 but my credit report is showing missed/late payment -6 up-to when I paid it off. Is there anyway I can get these removed because technically I defaulted/missed a payment back in April 2010 so should they have fallen off in April 2016 or have I got confused?
    Many Thanks

    Reply

  24. Hi there,

    I started my DMP well over 6 years ago, no missed payments, all defaults have now been removed, credit score appears great.. I am in a completely different financial position now so a few months ago I cancelled my DMP and have agreed with the remaining creditors to pay a much higher sum personally.

    Debts will be completely replayed within 18 months. At the moment our mortgage is solely in my husbands name and Ideally I would like to at some point make this joint with the aim to borrow more.

    At what point will I be in a position to do so? Once debts have been fully repayed? Or would it need to be 3 years after the dmp ended? Or 3 years after the debts are settled? Would it be helpful to apply for a small credit card now (and repay monthly) to start building a better score?
    Or will the debts I am now repaying myself be rebuilding my score? Or neither?!

    I am also worried about ever applying for a joint mortgage having a negative affect on my husbands application?!
    Any help would be greatly appreciated!

    Thank you.

    Reply

    • Have you checked your credit score with all three credit reference agencies? See https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to this for free.

      Assuming they are all great…

      You need to have cleared your debts before applying for a joint mortgage. And to have done so at least 6 months before the application as the lender may want to see 6 months of bank statements and you don’t want any trace of the debts showing.

      You need to avoid applying to anyone for a mortgage who you had a DMP debt to. So if you had a Lloyds credit card in the DMP, don’t apply to Halifax for a mortgage.

      When does the current mortgage fix end? Why do you want to borrow more?

      If your credit record is great, applying for a mortgage can’t damage your husband’s.

      Reply

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