Debt Management Plan and credit rating

kopite123

Hi, to cut a long story short, I got a load of silly debt out when I was 18 and now I am 24 I am paying for it. Its accounts to around £12000 in total but the payments just got too much, so I stopped paying them, a stupid and costly mistake. My girlfriend finally made me act and do something about the debt, so I took out a debt management plan after being told this would be best for me. I have been paying this for around 8 months now and my debt is coming down, very slowly, but atleast its coming down. My question is will my credit rating/score start to improve on this plan or will it remain 'very poor' until all the debt is paid off? I got myself into such a silly position and dont want to be penalised for the next ten years as thats how long it will take to pay the debt off at its current rate.

DCFC79

Maybe it will, maybe it wont but thats irrelevant as lenders dont see your rating/score, your file will have some effect for max of 6 years.

Id focus on saving, looking at your money and see if you can make any cutbacks.

Tixy

As part of the DMP you agree not to take out any more credit until the debts are repaid. So I wouldn't worry too much about your credit rating at the moment.

You'd need to look at your credit files to assess how long these debts are likely to impact on you. It is likely that your creditors have entered defaults on your credit file. Any account with a default will stay on your file for 6 years from the date of default listed on file.

After 6 years the whole credit entry drops off your credit file.

Is your DMP with one of the free/charity providers? or is it with a company charging your a monthly fee? If the latter consider switching as that money would be better going towards your debts and helping you get debt free sooner.

kopite123

Thanks for replies.

It is with Harrington Brooks who charge £30 a month. I will look into a charity one, would rather £360 a year go off my debts than anywhere.

You say a default will drop off after six years, how does that work if the debt is still not completely paid off?

Tixy

Definitely worth looking to switch providers - have a read of this thread for organisations to consider - IMPORTANT - Where to seek professional impartial advice about your debts.

6 years after the default date the whole credit account entry drop off your credit file.
So you credit file no longer shows that you owe that money, or that you defaulted on the account.

You still need to keep on paying though, and failure to do so could result in your creditor taking court action against you. If any creditor successfully takes court action then a CCJ will be listed on your file for 6 years from the date of judgement (unless you can afford to pay the debt in full within a month of judgement).

Fireflyaway

I was in pretty much the same situation. I found it was only after 6 years when the defaults were removed that things improved for me.

DorisTrousers

How much are you paying each month on your DMP?

10 years is a long time, and although you can shave some off that by using free organisations, or even doing it yourself, there may be other options that you can consider to get debt free much quicker.

A long term DMP is very rarely the right long term solution.