A reader asked about applying for a mortgage when she is in a Debt Management Plan (DMP):
“I have been in a DMP for 8 years and still have 6 to go as I still owe £16,000. With hindsight, I should have gone bankrupt!
My parents will give us a 20% deposit in 2021, but they don’t know about my debts so I can’t use their money to end the DMP. Will I be able to get a mortgage?”
I’ve written before about the general problem of getting a mortgage when you have debts, but this case highlights many of the specific issues around DMPs and wanting a mortgage.
This article also applies if you have made arrangements directly with your lenders or debt collectors. You may not think of this as a “DMP” but this sort of arrangement to pay is a form of debt management.
If you already have a mortgage and you just want a new fixed rate, this article is not relevant. See Can I get a new mortgage fix with poor credit? which has good news for you!
Contents
Would clearing the debts on your credit file help your credit score?
In debt management, some debts may have been defaulted. Others may be marked as “AP” which stands for Arrangement to Pay. Sometimes the debts aren’t marked at all, but just sit showing 6 months arrears.
Settling the debts that are still showing on your credit record, however they are marked, won’t directly help your credit rating and it won’t delete them from your credit record. They will drop off six years after the settlement date or, for defaulted debts, after the default date.
so for debts that haven’t been defaulted, the old AP/arrears markers will still be visible for 6 years after the debt is settled, showing that you had problems in the past.
It would be better if you can get the three creditors to put a default date on the debts which is over six years ago. Defaulted debts will always drop off your credit file after six years, whether you have repaid them or not, so with a default date of over six years ago, they would drop off your credit file immediately.
Even a default date of three or four years ago can be better if your DMP is still running.
This article What should the default date be? explains what you have to do.
Getting these AP/arrears debts off your credit record will considerably improve your score in a few years. But that’s not the full picture…
A great credit score doesn’t mean you will get a mortgage
Lenders don’t use these credit scores at all – they calculate their own. The credit reference agency scores are only useful as they pick up where you may have problems to resolve: a bad score and you are unlikely to get any credit, but a good score doesn’t mean that you will.
That’s why it’s not worth worrying about why Experian and Equifax have very different scores – no-one actually uses them! And why you shouldn’t fall for marketing hype about Boost increasing your Experian score – lenders don’t use that score so in the real world of a mortgage application it won’t help you at all.
This is especially important for mortgages. Mortgage lenders are fussier because they are lending you a large amount of money for a long while. They also have to use stricter affordability checks, so what you write on the mortgage application is just as important as what is on your credit file.
Debts matter even after they have dropped off your record
Just because a debt doesn’t appear on your credit file any longer, doesn’t mean it doesn’t exist or it’s not important
A debt can still be enforced by the creditor taking you to court for a CCJ. That would be a disaster for any mortgage application so you have to keep on paying these debts if you want a mortgage.
And mortgage lenders almost always ask for six months of bank statements, or for Open Banking access to your bank account which is just the hi-tech equivalent of bank statements. So they will see the debts that you are still paying or the payment to your debt management firm.
So even clearing the debts off your credit file means you still have a problem because the debts still exist. Basiucally they all have to be settled.
Two possible ways to improve your situation
Get lower settlements
The reader said she could pay the 3k to satisfy the three debts showing as AP and work towards clearing the other debts. But really they all have to go so her DMP ends – this will give her the best chance of getting a good mortgage offer.
Instead of settling the AP debts in full, she could try using the £3,000 to try to make full and final settlements on as much of the remaining debt as possible.
She has been in a DMP for a long while so some creditors may be prepared to take say 20% and most would probably take 33%, so perhaps offer 20% at the start? There isn’t a scientific way to work out what a creditor will accept.
National Debtline has a template letter for making this offer. Hopefully this small lump sum could then be used to clear 10k of your DMP. With a year until you are given the deposit, she may be able to blitz the rest of the debts down.
Are some of the debts unenforceable?
As these debts are old, it is likely most of them will have been sold to debt collectors. There is also a chance that the debt collector may not have the right paperwork for the debt… in which case they can’t take you to court. For debts that have already dropped off your credit record or will soon, this means you can simply stop paying them.
See Debts – why, how & when to ask for the CCA agreement which looks in detail at which debts this may work for and how to ask for the CCA agreement.
If this works, you will be able to pay off the debts that are enforceable sooner and will be able to save a deposit faster.
As the debts won’t be on your credit record by the time you apply for the mortgage, the mortgage lender will never see them.
DMPs and mortgages – summary
Being in a DMP makes it very hard to get a mortgage for three reasons:
- it damages your credit file
- it involves a monthly payment to your debts – this is a monthly commitment which goes into the “affordability” calculation
- it is a flag that you have had money problems in the past which are still persisting.
Is it impossible? Well if you have a large deposit there may be a “bad credit” lender that would lend to you – but that would be very expensive and it may be better to use some of the large deposit to end the DMP.
This particular reader has a clear way forward – she has a good chance of cleaning up her credit file by getting default dates added so the debts drop off and using full and final settlement to end her DMP.
This is going to take some time, but hopefully most of it will be completed before she is given the deposit in a year. If some of her debts are unenforceable, that will speed this up.
Many people with old DMPs will be in a similar situation – able to get debts to drop off their credit file and likely to have lowish full and final settlement offers accepted. You may feel reluctant to use some of the deposit you have been saving up to do this, but it is a good use of the money.
If your DMP was started less than six years ago, this is harder as defaults or AP markers will remain. For a very recent DMP, it will also be hard to get a low full and final offer accepted. You may be looking at several years of tough budgeting to clear the debts as fast as possible.
Improve your credit score for a mortgage
What should the default date be for a debt?
Making Full & Final settlement offers
Ellie says
My wife has DMPs on her credit file and is just about to finish paying her last one on this months pay. We really want to buy a home, how long after she pays all her DMPs would a mortgage lender even consider lending to us?
Weatherman says
Hi Ellie
Firstly, congratulations to your wife for completing the DMP! Must be a big relief.
It depends a bit on when the debts originally defaulted. If any of these are in the last 6 years, it might be difficult as the default will still show on her credit report. If you wait until these have dropped off, you’ll have a better chance.
The reduced payments towards the debts with the DMP will also show on the credit report for 6 years, but a lender is less likely to be frightened off by these than a default. It might still be a good idea to wait a few months though, because lenders usually ask for 3-6 months of bank statements to understand your expenditure, and even though the DMPs are now finished, they might get spooked by the DMP payments on the earlier statements.
There’s also no harm in speaking to a mortgage lender about your situation and seeing what they say. Good luck!
Bob says
I was in a DMP from 2011 to 2017. I paid it off in full – my credit file was not in good order with missed payments and defaults galore. I have just managed to buy our first home. I would say do not lose hope it is possible. Our mortgage was approved mid 2020 and by then as I had not missed any payments subsequently my credit file recovered.
Sara (Debt Camel) says
Thank you – people love to hear these real-life success stories.
David says
Hi Bob, that’s great to hear! Looking at the timeline I assume your original defaults from when you entered the DMP had dropped off your report by the time you applied for the mortgage. So just wanted to check if you disclosed the settled DMP or if it came up as a question in the application process? Many thanks!
Bob says
It is my understanding that DMP itself doesn’t show on your credit file but it’s the fact you are making smaller payments against your debts than you were required to make that show up as missed or partial payments.
My credit report with Experian was excellent, and with trans union and equitable it was very good. But there was still evidence of missed payments in my credit report but they were at least 4 years old when I made my application for mortgage. If it helps our mortgage was with a 15% deposit and it was with Halifax. It was a very simple process and there were no issues raised over my credit history which if I am honest was not great. I was at university through my 20s and was very irresponsible when it came to money. But thankfully with the passage of time and learning from my mistakes I have managed to secure my first house.
I hope this gives you hope. And good luck
David says
Thanks Bob!
A says
Do lenders see an Arrangement to Pay the same as a DMP?
Has anyone successfully had this changed to a default from the start date too with the creditor? The creditor has admitted that they didn’t give the correct advice on how much an AP has an affect on my credit file.
Bob says
I had both on my credit file and still managed to secure a mortgage. A DMP doesn’t appear on your credit file it’s the fact you are making reduced payments will show up as defaults rather than a DMP per se.
I think it is not detrimental but the longer ago it was the better. I was in a DMP from 2011 to 2017 and managed to buy my first home in December 2020 with Halifax. I could still see defaults etc but my credit score with Experian was 990 despite this as I had three years of never missing a payment. I would say do not lose hope.
Weatherman says
Hi A
Bob is correct.
A default should be recorded once you’ve missed or made reduced payments for 3-6 months. That could be before the Arrangement to Pay, or after (depending on how quickly the Arrangement was set up after you started having problems). If it’s been put on for a later date, contact your lender and ask them to move it.
A says
Thank you.
Nationwide left me in an Arrangement to pay for 5 years! I was paying the overdraft off as well as the interest – this was never frozen.
I have requested the full accounts from them on Friday as they have recorded 6 late payments in 2018 and 4 in 2019. I have bank statements showing the payments being made!
I have also started a complaint with FOS for what its worth. Not sure if they will do anything to help.
I just don’t know what to do for the best?
Halifax declined my mortgage- said i was in a debt management plan, which it wasn’t.
Sara (Debt Camel) says
So Nationwide made an arrangement to pay but didn’t stop interest and charges? I hope you are complaining about that as well as about your credit record. Ask for a refund of the interest and charges.
From the point of view of a mortgage lender there is no difference between an arrangement to pay and a DMP. A DMP is just a series of arrangements to pay set up by the DMP firm.
A says
Yep! Said they couldn’t stop the charges and interest as it was an overdraft! I remember having a phone call about it because I said my payments were just covering interest.
So I need to try and get this AP off if I can? Ideally they backdate it to the start as a default and then it would be off my file. Do you think I have a chance of this or wasting my time?
Sara (Debt Camel) says
I think there is a chance. But also complain about the added charges and ask for a refund.
A says
Thanks Sara, I really appreciate your help.
Hannah says
Hi, my fiancé had a plan with Wescot where he consolidated his finances, this was paid off in June 2019 and taken out in 2017. The lender Halifax kept chasing him for the payments in arrears but these were paid on time every month to the consolidation company and have letters confirming in July 2019 that these were fully paid and settled from both Wescot and Halifax. We have a £40K deposit for a house and have gone through a financial advisor to get a mortgage who suggested we pay off any debt we have which equates to around £15K. Mortgage application with Halifax got declined and then he tried another one with NatWest who we have banked with for years. Experian scores fair and good. He believes it is because of the consolidation. Prob not best idea to even apply through them. He suggested pay all or our debt so we will be debt free but keep the odd credit card open at zero balance & try again in a year. Debt paid will still impact us for an application in years to come? Albeit the settlement was only done in 2019 looking at these comments we may need to wait another 4 years to get a mortgage is this right? Our financial advisor has at present got the letter confirmations etc to see what he can do tomorrow for any other options as he suggested a 25% mortgage but we won’t be there yet with this once we have used £15K to pay debt. All advice on here looks genuine and sound so I am really hoping you can help
John says
Good evening I made the decision not to apply for a mortgage until I was debt free – I cleared my dmp in 2016 and spent next couple of years clearing car finance and credit cards. Over this time my credit scores recovered with Experian I was excellent and the other two I was good. Despite still having arrears or partial payments on my credit file I was accepted for a mortgage with Halifax. I think was was due to the fact that I had around 3 years after dmp was completed of never missing a payment. My advice is never lose hope because it is possible no matter how bad your situation was previously. I would say in my circumstances that time did heal my credit report!
We had a 15% deposit rather than 5 or 10% which also helps reduce the risk slightly for the lender.
I wish you luck with it.
Anon says
Hi John,
Thanks for your comment. Quick question if you don’t mind me asking, Did you have any defaults, if so how many and what value? You situation sounds very similar to mine but I have 4 defaults totalling under £2000
John says
Hi, my total DMP was for £16000 was a mix of payday loans and credit card debt. All of these accounts would have been defaulted as that is how I ended up in a DMP as I couldn’t afford the repayments anymore.
I just think irrespective of defaults, arrears etc that you need a sustained period of making all required payments. In my case doing so for three years seemed to satisfy all lenders.
Hope this helps
Weatherman says
Hi Hannah
Has your fiancé checked his other credit reports (Equifax and Transunion)? It’s possible there’s something on those that’s causing a problem, but that’s not showing up on Experian.
Six years after he took out the consolidation loan, it should drop off your fiancé’s credit report (as long as it didn’t default). So that would be 2023. Even before then, you might be able to get a mortgage – although you might need to go to a specialist broker, and the mortgage interest rates you can get will be higher.
It may be your financial advisor can pull something out of the bag, but if not, all is not lost! Good luck!
Sara (Debt Camel) says
“Halifax kept chasing him for the payments in arrears ”
You should not be applying for a mortgage to ANYONE you have been in arrears with, even if the debt has been repaid. If your financial adviser has not told you this, I suggest you should ditch him and talk to someone else.
See what happens with the NatWest application.
As Weatherman say, you should also check your credit records with the other two credit reference agencies.
You still have the consolidation loan? Is that a large monthly payment? You may be being rejected not because of the debt itself and your debt history but because of the impact on your affordability of the debt mnthly repayments.
Mr Jamie says
Hi
I’m about to apply for a mortgage and I’ve been in a debt management plan for 10 years which still isn’t paid off.
Will the bank deny me if they see I’m paying a debt management plan? It’s not on my file and my debts on it have cleared from my credit file.
What can I do? My payments on the dmp have varied. Over the years and won’t be clear for another 6 years.
The broker I spoke to didn’t mention it when she checked Mt credit report.
Do I need to be worried? Should I give up hope or what options do I have?
Sara (Debt Camel) says
Yes you need to be worried. Banks will spot the DMP payments from your bank statements.
Did you tell the broker about the DMP?
What sort of debts were in your DMP? If a lot were loans, credit cards and catalogues, then read https://debtcamel.co.uk/ask-cca-agreement-for-debt/. If the debt collector (not the original lender) can’t produce the CCA agreement for the debt it is unenforceable in court and you can stop paying. With old debts it may be that this will work for quite a few.
Then you need to settle the other debts, offer lower settlement amounts.
But this will all take time. It wont help a mortgage application soon. It is a shame you didn;’t start doing this this time last year.
Mr Jamie says
Hi sara thanks for the advice. I will look in to this now and read that advice.
No I didn’t tell the broker about my dmp as I kid of thought it would be listed on credit check I sent them a copy of and then suddenly realised it wouldn’t be but I have emailed them now to tell them about it and ask what I need to do to clear my dmp and improve my bank statements etc And I’ve explained that I am looking to pay it off ASAP and get it cleared so that no dmp payments will show on my bank statements very soon because none of it shows on my credit check at present
I am talking to all the old creditors to ask about settlements. I wasn’t looking to get a mortgage just yet but was hoping to get a mortgage aip within next 6 months.
Sara (Debt Camel) says
Many lenders want 6 months bank statements, so you may want to postpone getting an AIP until 6 months after the last debt is settled or you stop paying them if it is unenforceable.
Mr Jamie fox says
Thank you.
I’m talking to all my creditors today to discuss a settlement and get it cleared off my bank statements so I can start collecting clean bank statements
Len says
Hi Sara
You’ve helped me before – hoping you can again! I started a DMP in 2014 and made my last payment to Stepchange in February of this year after writing to all remaining creditors in November 2020 asking for CCA agreements, none of which have been forthcoming. One creditor has now closed my account anyway, one I am about to settle with for a small amount, leaving three outstanding. None of them are on my credit record anymore (have checked all three credit agencies).
I’m now looking to get a mortgage with a gifted deposit but the broker I’m speaking to is saying some lenders outright won’t consider me due to DMP. I don’t really understand how that can be, as how will they even KNOW? I’ve explained the debts aren’t on my credit history anymore. Do I have to declare I was once in a DMP or something? She is saying some definitely won’t lend at all, and some will want it to have been settled 1, 3 or 6 years? Again I don’t know how they’d know if none are on my file and no payments will be on the last 6m of bank statements by the time we’re ready to go. I’m also worried as I haven’t settled some of them at all.
Sara (Debt Camel) says
Are any settled DMP debts still showing on your credit record? Have you checked with all three credit reference agencies?
Len says
None are showing, have checked experian, equifax, transunion. No missed payments on anything closed in last 6yrs showing either.
Only annoyance is a hard credit search on my transunion report, by Intrum and marked as debt collection company, made in December 2020. They must have done the search when I wrote asking for CCA.
Sara (Debt Camel) says
Then I suggest you wait until your bank statements are clear for the past 6 months and then try a different broker!
But you will need to tell the broker the names of the banks you had problems with in the past so as to avoid applying to them
Bob says
Good afternoon,
I settled my DMP in 2017 and got a mortgage last year. All record of defaults etc had fallen off my credit files and my credit score had recovered after another year or so. I got a mortgage first time with Halifax so do not lose hope it is definitely possible!
Bob
Keith says
Hi Sara
After reading the comments, I am wondering will the same difficulties apply when I go to remortgage next year in December 2022 , as it would if i was looking for a firs tmortgage? My situation is:
– I took a DMP for £27k in March 2018 – debtors gave me a default of either March 18 or October 18, bar Nationwide who have not given me a default at all (says “up to date”? ) , and my PO loan, which only went into default on 1st Jan 2020 (this feels unfair)
– After reading these comments, its seems getting rid of the DMP through partial payment and creating a time gap between now and Dec 2022 remortgage time is the best way to go, is that correct? I could probably get together at least 50-70% of the remainder of the debt balance £12k) by selling personal possessions and a family gift
– The info I’m getting re default dates etc is from Totally Money site, they give me a current credit score of 522, and a borrowing power of 3.3 / 10
With these facts in mind, how likely am I to be able to shop around for a better mortgage deal in 18 months (joint mortgage with my debt free wife) if i complete this in the next couple of months please? My current deal was a 5 year fixed term deal with HSBC …..
and should I persue a default date change with my Post Office loan first to 2018? All of my card and loan debts have been passed to either PRA or Intrum who I now pay through my DMP
Thanks for any advice
Keith
Sara (Debt Camel) says
Broadly a remortgage with the same lender may be less fussy -. But a remortgage with a new lender will be the same as getting a new mortgage.
Lucy says
Hi Sara,
My partner and I are looking to get a mortgage this year, our combined income is £55,000 and we have a deposit between us of £60,000.
Unfortunately I got into financial difficulty a while back and had to enter a DMP. On my credit reports I have two late payments over two years ago and an ‘arrangement to pay’ on my report which ended over a year ago, do you think we would get a mortgage at a decent rate?
Thanks
Sara (Debt Camel) says
how large a mortgage do you want?
has your DMP finished? if not, how much do you still owe?
Lucy says
Yes DMP has fully finished, paid off a year and a half ago!
We would be looking for a mortgage around 230k if possible.
Sara (Debt Camel) says
so you have a 20% deposit and no problems for the last year. I assume all the DMP debts have dropped off your record.
I would hope you can get a mortgage at an OK rate from a high street lender. I suggest you talk to broker. You want to avoid applying to anyone who had a debt in your DMP.
PS please don’t leave duplicate comments. It wastes my time and delays a reply as I have to sort through them all and delete all apart from one!
Lucy says
The debts are still on my records but settled and paid off.
Would this be ok?
Sorry for the duplicates, I didn’t think my response had published! Will know for future reference!
Sara (Debt Camel) says
So it’s worth talking to a broker. explain your past situation.
Sara (Debt Camel) says
So your credit record is showing several (lots?) of defaulted debts or debts in payment arrangements that have been settled?
Lucy says
So three accounts in total on my credit report are affected, there are no defaults or missed payments.
Account 1: 12 arrangement to pay marks up until end of 2019, June 2019 two months late paying
Account 2: 1 arrangement to pay mark Jan 2019, 1 month late paying December 2018
Account 3: Arrangement to pay marks Oct 2018 – Dec 2018
Hope that makes sense, there is no defaults just the above marks on my report.
Shaun says
Thanks for the super quick reply!
I’m sorry! – I wasn’t very clear with some of my points!
(Few more questions too!)
Because the creditor cannot produce the CCA agreement? Have you stopped paying these?
Yes – CCA Not available and I’ve stopped with a view to negotiate a F&F at a later date. What would be a realistic percentage? I’m not trying to avoid the debt, I spent it! I just would like a better deal!
Are all your other unsecured debts cleared?
Yes :o)
You had mortgage arrears paid as part of your DMP? Thats… unusual.
No – The second schedule may have been misleading, sorry! It was a fixed sum loan agreement that was part of a Northern Rock “Together” Mortgage.
it is highly unlikely Landmark will backdate a default…
Is this more likely with a fixed sum loan agreement?
This is an arrangement to repay arrears?
No – it’s the fixed sum loan agreement.
I don’t understand the benefit to Landmark or Myself….
If you have repaid a lot of unsecured debt, can you not afford to clear the mortgage arrears sooner…
Yes – I can pay the full balance by the end of the rescheduled term (October 2023)
I was concerned that the agreement had been rescheduled to a shorter term. If it had been rescheduled in-line with the original term my dmp payment would possibly have made the contracted payment and I wouldn’t have the credit file issues I do now.
Have I anywhere to go with this?
Thanks :o)
Sara (Debt Camel) says
If the unenforceable debts have dropped off your credit record, I suggest you just forget about them and use the money to repay the remaining debt. And after that your mortgage. You have probably paid more than you borrowed over the years.
Has the interest been frozen on this Landmark debt?
Is there a default date at all? or are you saying it is too late?
Shaun says
Hi
Yes – the unenforceable debts have dropped off.
I’ll do that then!
My credit file is clean other than the landmark loan which shows 6+ Late etc.
The interest appears to have been frozen.
They’re is no default date at all just late payments.
Yes, sorry – is it too late to ask? And knowing landmark are difficult in these cases, would I have the reduced term augment where if they hadn’t reduced the term, the payment would have been met (I’m aware how much interest they have saved me! Just trying to clear my credit file and start over :o) )
thanks
Sara (Debt Camel) says
If they have frozen the interest then that is because you are in financial difficulty, so you are only expected to pay the amount you could to this debt. What has now changed is that you can repay more, as your other unsecured debts have gone. They aren’t being unreasonable in expecting you to clear the debt as soon as possible when the interest is frozen. And this is in your interest – you want this debt cleared, not back to paying standard interest.
I don’t see why you can’t ask them to add a default date back when the DMP started as the article above says. They are FCA regulated – you can take your complaint to the Financial Ombudsman if they refuse.
Shaun says
In short – I’ve made this extremely difficult for you, so thank you for your patience!
Again – I’ve missed information!
Landmark Rescheduled the agreement 8 Years ago and I was in such state financially at the time, I didn’t notice.. I was just happy making payments via my DMP.
However – you have answered my question, I’ll let you know how I move forward.
Thankyou!!!
Paul says
Hi
I had a DMP which ended in December 2021 after 6 years.
My credit score is now pretty good and my file shows zero missed payments in 6 years.
I since applied for a couple of credit cards to help repair my credit rating and was successful.
I want to apply for a mortgage, I have 20% deposit , will the DMP still affect my application?
Should I wait longer before applying ?
Many Thanks
Paul
Sara (Debt Camel) says
Congratulations!
So you have no defaults, missed payments or payment arrangements on your credit record? All the accounts in your DMP must have been marked as defaulted over 6 years ago and dropped off?
Rod says
Hi Paul,
Well done getting back on track. I had completed my DMP about 8 months when I applied for a mortgage and was successful. The DMP itself was not showing on my credit files but a number of missed or partial payments were still visible at the time of applying.
I applied to Halifax via a mortgage broker and was successful first time. We had a 15% deposit so you are actually is a better position than I was with 20%.
I would say the older the missed payments are the better but before making an application it may be worth seeking advice from a broker as making a mortgage application will also impact your rating.
Good luck with it and I would say certainly do not lose hope it is very much possible as I have proven.
Rod
Paul says
Many Thanks for the help! I did talk to the bank yesterday and it was better than expected
Paul
Paul says
Hi, thank you, it’s a big relief! it seems that way but I wasn’t sure what else they could access, can they see I was on a DMP ? Also, I read on here somewhere about the DMP payment showing on my bank statements, so that was why I asked if I perhaps needed to wait a while ?
I start an initial enquiry with L&C about getting a mortgage but one of the questions was asking if I ever had a DMP, and even when I said yes it went on to ask if it was complete and did I ever miss a payment, which I didn’t but it seems that question then meant they could not help me and I was advised to contact a company called Chartwell which I presume specialise in people with bad credit which I am trying to avoid as it will obviously cost more. I’m still unclear if I fall into this category because of the DMP I had.
I accessed my credit report on a few free sites, if I was to pay and access my full report, am I likely to find out more ? or is this just a way to get 14.99 a month from me
Many thanks
Paul
Sara (Debt Camel) says
This article https://debtcamel.co.uk/mortgage-debts-not-on-credit-record/ looks at what mortgage lenders can see.
Every mortgage lender asks for bank statements and they will notice the DMP on there. Some only ask for 3 months but many ask for 6, so waiting 6 months before applying is probably a good idea.
If you have recently opened new credit card accounts, waiting 6 months also gives them time to start helping your credit score – at the beginning all new credit harms your score. Don’t take any more credit out! The best way to use these cards is to buy one thing a month with each (eg a tank of petrol or one food shop), costing less than 30% of the credit limit. Then set up card to repay in full automatically by direct debit.
The credit reports that charge don’t have any additional information that isn’t on the free ones. Make sure you have checked a report from each of the three credit reference agencies: Experian, Equifax and TransUnion in case one of them has an error – these take time to get corrected. See https://debtcamel.co.uk/best-way-to-check-credit-score/
Sia says
Myself and my partner entered into a DMP 3 years ago due redundancy and maternity. We have been able to save roughly a 10% deposit however mortgage lenders are asking for 15% and a higher interest rate due to the DMP being in place. Are we best coming off the DMP and setting up payment plans with individual creditors so that we technically don’t need to say we are in a DMP anymore? Therefore making more options available when looking at mortgages through brokers? Debt collectors have advised us of this option however aware that the mortgage provider who is wanting to give us a chance state’s that DMP must be in place for 1 year so didn’t want to risk ending this and still not getting accepted by a bank due to arrangement.
Thanks
Sara (Debt Camel) says
Are we best coming off the DMP and setting up payment plans with individual creditors so that we technically don’t need to say we are in a DMP anymore?
I am not sure why a mortgage lender would see that as an improvement? OPaymenst arrangements are just a DMP without using a DMP firm…
How much have you saved?
How large are the remaining debts in your DMP and what is the monthly DMP payment? Who is the DMP firm?
Elle says
Hi not sure if this was the best place on the site to ask, partner is in a DMP for around 4K we are wanting to buy a house this year. We are thinking of using some of the deposit to repay the DMP now and recoup the money over next few months in savings. My query is do you have to pay full amount or can you make offers to company’s to settle? And what would a reasonable offer be? How would we settle via the debt management company or original lender? Thank you
Sara (Debt Camel) says
How long ago did the DMP start?
Are these debts showing as defaulted on their credit record? How long ago are the default dates?
Have they been sold to debt collectors or are they still with the original lender?
Elle says
Hi thank you, they have been sold, show as defaults. DMP been in place for about 1 year not sure of dates of defaults would that impact any offer we could make?
Sara (Debt Camel) says
yes, debt collectors the debt were sold to are MUCH more likely to accept an offer.
Best to offer directly to the current debt collector.
But with recent defaults (you need to find out the dates – check your credit records) then you will have problems getting a mortgage even if you settle them now. The normal rule of thumb is that a default has to be more than 3 years old AND settled for more than a year before you will be considered for a mortgage at an OK rate by a high street lender.
So the sooner the debts are settled the better. But you may still have to wait a year after that.
How large is the deposit?
Elle says
Thank you so much. Do you have any idea what a reasonable offer in terms of percentage of the debt is I don’t wanna offer too much. I know there will be lots of factors that affect it but a baseline idea would be great as I’ve never been in this position with debt collectors
Also Lowell’s for example have multiple accounts for him from different company’s he owes money to – if you offer do you make an offer to settle them all or do you have to make settlement offers on them all individually?
Deposit currently have 15k but will have at least 20k by time we buy we can’t buy until end of year as I can’t withdraw my LISA until then – will probably use help to buy too to reduce amount we borrow from mortgage provider
Sara (Debt Camel) says
You said the DMP has been going for a year. Was that when you defaulted on the debts, or was that earlier? If they were only defaulted a year ago, you may well have to pay 75% to settle them. And some creditors may insist on the lot.
Sara (Debt Camel) says
read https://debtcamel.co.uk/full-final-settlement-rejected/ this looks at why a settlement offer may be rejectd – it mat help you think about how good your offer will look to a creditor.
Richard says
Hi Sara. I have successfully remortgaged while in a DMP and released enough equity to hopefully agree FAF’s on my debts. I am duty bound to let Moorcroft etc the origin of the money?
Sara (Debt Camel) says
I hope this mortgage was at a low rate. Paying problem debts where no interest is being charged with a secured loan is not normally a good option at all.
A creditor doesn’t have to accept a F&F offer and will normally ask where the money has come from.
Jibran says
Hi,
I already have a joint mortgage but I am struggling with debts and planning to go in the Debt management plan, not doing DMP for my wife so her credit file should be fine, we have a remortgage due in Dec 2025, can you please advise will it be difficult for us to product transfer if we stay with the same lender?do we have to inform them? if unable to re-mortgage or product transfer will I lose my house or can I carry one with variable rates?
Sara (Debt Camel) says
Some questions – but first assuming you can’t pay your debts then whatever the effect of a DMP is, there is probably no option that would have LESS affect on you when it comes to remortgaging.
How large are your debts? How much will you be paying a month to the DMP at the start?
Do you have any priority debts – I assume no mortgage arrears, but any council tax arrears, energy debts etc?
Is anything else large going to change in your finances in the next few years – car finance ending? another child? child leave home?
Does your wife have debts as well, even if she is managing to pay them?
Jibran says
Thank you for your message, please see my answers below:
1-I have a few credit cards and one loan totaling up to £40k, as per the step change calculator it is coming to around £200 monthly payment.
2- I have no arrears of mortgage or council tax, even though I don’t have arrears on my Loan and CC yet( paying minimum ), but I am struggling and CC debt is increasing so eventually I am using my CC more, however, things are going to change severely in the next few months when my interest-free period expires on CCds which will result in more minimum payment plus interest.
3- Dont expect significant change only daughter is 6 years old, can’t say about another child but I will say yes, no car finance neither plan, no plan to move house nor buy another house, however, don’t want to risk losing my current house, I am happy to stay with a current provider even when my fixed term ends if product transfer is possible with DMP.
4- Wife has CC debt of around £10k, but her income can manage it.
Sara (Debt Camel) says
thanks for those details.
If StepChange think you can only afford £200 a month then is is VERY likely that you have to have a debt solutaion and a DMP will harm your credit record much less than an IVA which is a form of insolvency.
But it will take you you 16-17 years to clear your debts in a DMP. That is a very long while. Did StepChange talk about an IVA as an option? IVAs are problematic but so are ultra long DMPs. (One thing to be very careful about in an IVA is the need for equity release in the last year, but StepChange are one of the few IVA provoders i would trust to not ask you to out an expensive secured loan. )
“will it be difficult for us to product transfer if we stay with the same lender?do we have to inform them?”
It is often easy to get a new fixed rate with your current lender even if your credit score is poor. Getting a new product (changing the term, or loan size) is less easy as that is a completely new mortgage and the lender would look at your credit record and affordability.
“if unable to re-mortgage or product transfer will I lose my house or can I carry one with variable rates?”
when a fix comes to an end, yout mortgage continues but you then pay the lenders Standard Variable Rate. See https://debtcamel.co.uk/fixed-rate-remortgage/
Your wife’s credit record will NOT be fine when you are in a DMP. because you have a joint mortgage. you are therefore fiancially linked and her score will be impacted by the payment arrangements and then defaults that will show on yours. If your wife currently has credit card debt at 0% and hopes to refinance this in future, that may well be a lot more difficult. She needs to be planning to clear this debt to minimise the damage.
If she is going to struggle to pay more than the minimums then it may be better for her too to look at a DMP so the two of you get all the pain over together.
Jibran says
Thank you for your swift reply and very helpful as I am very stressed and all the time thinking about it.
When you say debt solution you mean DMP or something else? I definitely don’t want to go the IVA route.
I understand your point that it will take longer to clear debt, however, I believe I will have some funds at some point in the next few years if my wife has some savings, I may progress in my career and as a result of my income increase, receive a bonus which is not guaranteed but possible, also someone owes me large sum if I receive it I can use it ( chances are slim) also lenders sometimes accept partial payment as a settlement?
I understand my wife’s records will impact as well, but I just don’t want her to have the same impact as mine, I am confident we will be able to manage her debt and will not need new credit.
To be honest I will be happy to stay with the same lender same terms and even a bit higher rate than the market as long as product transfer is easier and without disclosing DMP to them or a credit check.
Sara (Debt Camel) says
A DMP will remove a lot of this stress.
By debt solution I meant some way forward instead of making the normal repayments which you cannot afford. the possible solutions (ignoring ones that you are not eligible for) are:
– payment arrangments. these have the same effect on your credit record as a DMP. They have no advantage over a DMP and would be pretty stressful for you to negotiate as the debts are so large.
– a DMP which you are looking at
– consolidation loan would have to be secured and would probably be expensive – putting your house at risk is not a good idea
– an IVA is a possibility. I mentioned it not because IVAs are great but because your DMP would be so long it’s important to look at the alternative
– bankruptcy is undesirable as the house would have to be sold.
Partial settlements are an option with a DMP. Come back and ask here when you have some funds – don’t ask StepChange as they arent very helpful with them.
ALso an option with a DMP is making affordability complaints. See https://debtcamel.co.uk/tag/refunds/. Once your DMP is up and running, I suggest you take some time to think about whether you could have any good complaints about debts in your DMP or debts that have been settled. Winning a complaint can get interest removed/refunded and your credit record for that debt cleaned.
Jibran says
Thank you for your reply, is it possible if i use available credit to clear wife debt, I know it is not ideal but better then both of ua going on DMP.
If I make affordiblity complain wont it make my creditors angry? As DMP has not legal binding?
Sara (Debt Camel) says
No you must not do that. It’s not fair on your creditors.
And you don’t want any of them to decide that you have behaved badly and reject the DMP. That isn’t at all likely unless you do something silly like clearing your wife’s debt just before the DMP.
Jibran says
Ok noted, thanks. I believe I will go for DMP as thats the best option for now.
John Bell says
Hi,
I have just found out that I have a Debt Management Programme flagged against one of my account but I never signed up to it and would have refused. I am struggling to get the company to remove this flag from my experian credit file and it is affecting my mortgage application. The Debt Management Programme does not show on any of the free credit reports that you can get online and I only found out about it from the mortgage company. Any advice for me?
Thanks
John
Sara (Debt Camel) says
so you never paid less than the normal payments to that firm?
which CRA is it showing on and have you checked the statutory report from that CRA? See https://debtcamel.co.uk/best-way-to-check-credit-score/ for how to check these.
John Bell says
I have just come of the phone to the company that put the flag who are a debt management company and they have said that Peachy Loan informed them that I was in an IVA which I have never been in. They have raised a complaint but I need this sorted quicker than they are going to sort it out which is making me angry.
Sara (Debt Camel) says
who is this debt management company and why would they be talking to a payday lender? Did you ever use peachy?
Debborah says
Hello 😊
I have a query, I found out 3 months ago that I have a credit card debt that is deemed unenforceable by PRA. The debt dropped off my credit report around 4 months ago. And I have not paid anything towards it for 18 months as I knew it was unenforceable due to a SAR I sent to the Original lender Barclays.
I passed an AIP with Halifax so they see know issues. If they request bank statements nothing will show, should I have declared this or do I not because they will never see it anyway?
Sara (Debt Camel) says
This is not a debt you have to make any payments to – for practical purposes you no longer owe this. If you have gone through a broker, tell the broker so they know the full situation.
Mike says
Reading this comments is soo confusing 🙈🤣 so i started a dmp in nov 2021 with my last registered default jan 2022 dont know why they still registered it as a default but they have reguses to remove from my report total amount was around 80k combined i came into some money jan 2022 and cleared the majority of debts and now only have 1 outstanding company which i am paying off monthly when will my potential mortgage be from date i finalise the debt or when i closed my dmp or when my defaults was registered
Sara (Debt Camel) says
How large a deposit do you have? When will this last debt be cleared?
Mandy says
I have a DMP which has been running for 3 years through Step Change. My partner is going to buy some of the equity in my property so I can get these paid off in full (I currently have another 6 years to go).
I have approx £30k outstanding and I know that at least £10k is still with the existing lender (Nationwide Credit Card £7.5k and Paypal £2.5K) the remainder is writh Moorcroft and PRA. I would like to make a F&F offer and need some help to know what to offer, technically speaking, I could pay all of it in full, but that would mean my partner covering the cost, what would be a reasonable offer to start with? I plan to do this myself with each individual creditor rather than through Step Change, so I can be flexible with what offer I make to each creditor, any help or advice would be massively appreciated!
I also want to say the information on this site is wonderful, I wish I had stumbled on this site when my world fell apart 3 years ago :)
Sara (Debt Camel) says
So you are paying about £400 a month? is this affordable? When does your mortgage fix end?
Mandy says
I currently pay £423 and I have a mortgage fix for almost 4 years more, it is affordable but does put me under huge financial pressure with the increased cost of gas/electric and fuel in general.
My partner wants to make my life easier for me and we do plan to downsize/relocate when the mortgage fix comes to an end, I’m 57 and hoping to be able to take things a little easier when I hit 60!
Sara (Debt Camel) says
So your DMp was already running when your mortgage fix started – was this at a higher rate than before, if so was your DMP reduced?
The reason I asked for this, is that your creditors are more likely to accept a lower offer the less you are paying to the DMP. You could ask your DMp firm if it is possible to reduce your DMP payments.
Mandy says
The 5 year fix was £90 higher than my previous mortgage payments but I never adjusted the budget as I was earning slightly more in a job, but what I want to do now is settle all my DMP with money from partner and I am just looking for advice on what is the best offer to make for a Full and Final Offer my debts are as follows:
PRA Group (formerly Halifax Loan) £10420.55
Nationwide Credit Card £5257.84
PRA Group (formerly Halifax credit card) £5236.53
Intrum (formerly Creative) £3329.70
Moorcroft (Collecting for Paypal) 2648.38
Intrum (formerly Creative) £1551.77
Nationwide Flex £914.10
Total outstanding is just under £30k, my partner is gifting me enough to clear it, but as it is his money, I would like to be able to negotiate a discount. My DMP has been running almost 3 years now and the current monthly amount is £423 (it’s always been around that amount each year) and I have maintained this by having a lodger at times when it was very difficult, but I am now in a position to be clear of it finally
Sara (Debt Camel) says
what I want to do now is settle all my DMP with money from partner
Yes I understand that. But I also thought you probably want to pay as little as possible to do this… So what I was saying is if there is a good reason to reduce your DMP payments then your DMP would take longer to pay them off so it is more likely that your creditors will accept a lower offer.
Other ways you could potentially reduce what your partner has to pay – which would leave you both with more money in the future – include:
– making affordabilty complaints against Halifax, Creative and Nationwide – see https://debtcamel.co.uk/tag/refunds/
– asking PRA and Intrum to produce the CCA agreement for the debts they own – see https://debtcamel.co.uk/settlements-old-debts-cca/
It’s up to you if you want to try any of these options before making settlement offers. They will delay making settlement offers but could potentially save you money.
If you don’t want to delay, then you can offer a lower amount saying that a family member has offered you the money if it can be used to get a settlement offer on your debts as your DMP payments are becoming difficult. See https://debtcamel.co.uk/debt-options/less-common/full-final/. I would probably offer the debt collectors 60% and Nationwide 75% but there is no science behind this and I don’t have records of what amounts have been accepted.
Mandy says
Ah, yes I see what you mean! I did look at the affordability aspect and never realised it was a thing until finding this site, I am happy to do all that I could to get it reduced, time is of no real issue in that respect, thank you again, I’ll try that and had also decided to ask for the CCA for the debt collection ones – thanks again, I’ll keep you updated!
Sian says
Hi, myself and my husband entered into a DMP in Jan 2019, we cleared this through settlements in September 2023. We have started saving our deposit and have around 10k and hoping to save more within the next few months. What would our chances for a mortgage be now? Will after September be better or will we have to wait until 6 years from our last default date which will be around April 2025? I feel like this has been such a long journey and worried we’ve still got years to go before we own our own family home.
Sara (Debt Camel) says
How large is your deposit now? How larger will it be in September? In April next year?
Sian says
We have £10k at the moment in a help to buy ISA, we should be able to save an additional £5k before October and another £5k before April 2025. We are looking at around £220k houses as live in the north so prices aren’t too bad. We recently got accepted by Kensington mortgages however the rate was nearly 8% and this was just after we had paid our final settlement on the DMP. The broker mentioned that the DMP needed to be satisfied for 12 month before we could say ‘we didn’t have one’ however the more and more I read the more I’m thinking it will be when the defaults fall off.
Thanks!
Sara (Debt Camel) says
You can get a mortgage with a DMP still showing on your credit record. But from a bad credit blender like Kensington it is going to be very expensive and I would not recommend this. Too often I see people who were told by their broker that it was “just for 2 years then you can remortgage at a normal rate with a high street lender” – well that proved impossible in 2009-2013… and is again proving impossible last year and this year…
It is easier if the debts have been settled for at least a year before, or even better two years. And it is easier if your deposit is larger.
At the moment you have less than a 5% deposit (take into account buying costs such as conveyancing and moving!). By September 2025 you will have settled the debts more than 2 years before and will have a 10% deposit.
Paul says
Good morning,
I completed a DMP and having done so waited a further 12 months by which time all defaults or missed payments were off my credit file.
We had a 15% deposit and were successful with Halifax with no questions asked. I would recommend using a mortgage advisor and be honest with them as they will know which lenders are more likely to offer you a mortgage.
I like you thought I would never get a mortgage but we are now 4 years into our mortgage and due to remortgage next year.
All the best with it but do not lose hope as it is possible.
Al says
Hi, good to hear that. When you say you were successful with no questions asked, did you need to disclose the settled DMP or not? Thanks
Shaun says
Hello, in august 2022 I entered a DMP for about 29k..it is currently about 23k..I’m in the process of selling my property as myself and partner are separating..i will be paying the DMP off in full once I receive the funds and should have about 20k left for a deposit for a house. Just wondering how long I should wait after the DMP is paid off as I won’t have many options on places to live once this property is sold. Thanks
Sara (Debt Camel) says
have all the debts in it defaulted?
Shaun says
3 in default..1 in arrears and 2’in special arrangement..all of which included in my dmp
Sara (Debt Camel) says
With recently settled defaults or payment arrangements you will find it hard to get a mortgage at an OK interest rate, Ideally you would wait two years, but one year would be better thatn trying to buy straight away.
Have you looked at whether you can win any affordability complaints about the debts in the DMP? See https://debtcamel.co.uk/tag/refunds/ which has articles about different sirts of debts – loans, credit cards, overdrafts… Winning any rill reduce the balance to be cleared, so you would have a larger deposit. And it may also remove the negative marks on your credit record. These complaints take time, so get going now if you think you may have a good case having read the relevant article.
Shaun says
I understand waiting but once the house is sold I am very limited to where I can live and I think if I go down the renting side of things I’ll never get out and get a mortgage
Sara (Debt Camel) says
You asked about getting a mortgage after a DMP. Often there is no nice option.
You can also look at affordability complaints about all the debts in your DMP. See https://debtcamel.co.uk/tag/refunds/ which has articles about different sorts of debts. Any you can win will reduce the balance, leaving you with a larger deposit.
Ann says
Hi
I have been in a DMP for around 6 years (originally managed by Stepchange but then self-managed for the past several years using some of the great advice on this site).
Started at about 42k and 7 creditors and now down to around 8k with 2 creditors left. I should have this paid off by March 2025 at the latest (sooner if I can get a partial resettlement accepted). I have lowered my payments to the last 2 creditors and am saving around £600 a month to be able to make settlement offers (or just settle in full if necessary).
By June 2025 all defaults will have dropped off my credit file and I’ve had no other issues, missed payments etc. since.
The one exception is Amex who I hadn’t realised had done an arrangement to pay instead of default, which is annoying as of course is on the file much longer (paid them off in Sept 2023).
Anyway, by September 2025 my situation should be – DMP paid off at least 6 months ago, no defaults or missed payments on credit file, one arrangement to pay on credit file which will be two years old.
We should have £50k saved towards a house deposit (thanks to mostly my husband) and be looking at £300k houses with a joint income of around £65k.
Oh and just to throw into the mix I’m also self employed.
Realistically does these seem likely we’ll get the mortgage in Sept 2025 and also is there anything else I could be doing to help this in the meantime (other than what’s mentioned above)?
Thank you so much.
Sara (Debt Camel) says
I think there is a reasonable cahnce yiou shoyuld be able to get a mortgage, but it of course depends on what the mortgage moarket is like in a year’s time. Go through a broker, do not apply direct.
Ann says
Thanks for the reassurance Sara – yes will definitely be going through a broker!