DMP credit rating

Johnl86

Hi

Not sure if this is in the correct place but while on a DMP is there anyway of slowly creeping your credit rating up ? cant help thinking my life now for many years is going to be a uphill challenge to obtain future credit for mortgages etc

Thanks for any replies :money:

KirstyO

Hi John,


Only got time for a quick reply but didn't want to read and run.


I was in a DMP for around three years (should have been MUCH longer but came into some money) between 2012 and 2015.


My DMP ended in Jan 2015 and just before this ended I was approved for a Barclaycard Initial. In November last year I was also approved for a 95% mortgage.


It's not all doom and gloom. HOWEVER it's really important to note that some DMP providers offer their services on the basis that you don't take out credit while you are in their plans. It's a bit of a moot point as people who are in DMP's aren't likely to want to take out any more credit, and may have such a bad track record with money that they don't get any credit anyway.


I was in a position where I had kept up some accounts without any adverse payment history (a mobile phone contract in my name but that my parents paid for) and a graduate overdraft that wasn't yet an issue. I don't know whether this afforded me a slightly better position than someone who had missed payments/drastically reduced payments on all of their bills and credit.


It is an uphill struggle, but if you are in the position of being in a DMP then it is likely that you'll want to re-educate yourself before deciding a) whether you ever want to use credit again and b) what credit you're going to want, when and how you're going to obtain it.


The obvious place to start is at the end of your DMP with a high-interest, low-limit credit-building credit card. But know that you have to be incredibly disciplined and need to pay it off in full every month in order to a) avoid interest charges and b) prevent a new downward spiral of debt.


I have a Barclaycard Initial with a £1200 limit. I self-restrict my c/card usage to £80 a month because I know that I can afford that every month without fail. The only time I bend this rule is when I am making large one-off purchases where I like the peace of mind of using a c/card for purchase protection and also when I already have the money saved to pay it off (then I can keep the money in my bank earning interest for me for another month!).


Hope that helps. I guess the most reassuring thing is that all is not lost. It depends how trashed your credit history is and all, but there is very little on a credit file that cannot be fixed with a bit of patience. As long as there is no bankruptcy/iva the wave is generally rideable.

National_Debtline

Hi John


Really useful insight from Kirsty above, though of course no two debtor's circumstances are exactly alike.


A lot depends on how long you envisage your DMP lasting and when/whether your creditors default your accounts. Arrangement to pay (AP) markers don't necessarily affect your creditworthiness as heavily as default markers do, but they can linger on file longer if the plan drags on over several years, whereas an account will disappear off your file completely six years from the date of any default.


It's important to stress that nothing puts you on a mortgage "blacklist" as no such thing exists. It's just a case of sometimes having to employ a broker to find a mortgage product if you're struggling to be approved through the usual channels.


Dennis
@natdebtline

john1986

Thanks for both replies really explained in terms I understand just didn't know if there anything I could do along the DMP that could help me slowly raise credit score, it will be a total of 6 years that I'm on the plan, do currently have a mortgage but would want to move Into a bigger house while still on the DMP is that at all possible ? (I will probably have minimum 20k equity from house sale)

National_Debtline

Hi again John


It's impossible to quantify your chances of obtaining a larger mortgage within the next six years, as there are so many variables involved. Having equity to play with obviously helps but the loan-to-value ratio of any new mortgage will be a major factor e.g. a £20K deposit on a £200K house means you're looking for a 90% mortgage.


Bear in mind too that even if you weren't on a DMP, you would presumably be making some sort of reduced payment arrangement e.g. DIY negotiations, and this too would be reflected on your credit report in some way. Any mortgage lender will take into account outstanding unsecured commitments when assessing you, whether those commitments are fully up to date or not.


In brief, it's not impossible to get approval for new mortgages while pursuing a debt solution, but it's generally very difficult, and you won't be offered anything near the lender's optimal interest rates and deals. Ideally you would want to eradicate the existing debt entirely before seeking any fresh credit.


Dennis
@natdebtline

sourcrates

john1986 wrote: »

Thanks for both replies really explained in terms I understand just didn't know if there anything I could do along the DMP that could help me slowly raise credit score, it will be a total of 6 years that I'm on the plan, do currently have a mortgage but would want to move Into a bigger house while still on the DMP is that at all possible ? (I will probably have minimum 20k equity from house sale)

It's not your credit score that counts for anything John, it's your credit history, ignore the score, it means nothing.