How long does a dmp last?
To get a DMP, you’ll usually need to:
Only ‘non-priority’ debts can be included in a debt management plan, such as:
Debts that can’t be included in your DMP are called ‘priority’ debts, because there are more serious consequences for not paying them. These include:
The length of DMPs can vary hugely. How long your DMP lasts will depend on how much debt you have, and how much you can afford to pay off each month. But it’s not unusual for DMPs to last between five to 10 years.
If your DMP involves you making repayments less than the amount originally agreed with lenders, then it will affect your credit score. This means you could find it harder to get credit while making reduced payments. We cover this in more detail below.
A debt management program may benefit your personal and financial life by:
There are some down-sides to getting a DMP. You may find they’re outweighed by the benefits, but it’s important to be aware of them:
Learn more about financial association or you can find out if you share debts with your partner by getting your credit report. Simply check the ‘financial associates’ section for their name.
Yes – creditors are under no obligation to accept your DMP. They might do this if they don’t want to accept reduced payments or feel you could afford to pay more. If they refuse to negotiate with your DMP provider, it can be worth negotiating with them yourself. Outline what you can afford to pay each month and why.
Creditors are likely to accept a DMP if they see it as the easiest way to recover their money.
Remember that creditors can’t refuse to take reduced payments. You can continue to make payments, which can help keep lenders onside and give you some breathing space while you negotiate a solution. But if a creditor refuses to change their mind, you may have to deal with that creditor separately.
If you miss a payment, contact your DMP provider straight away. Missing payments could put your DMP at risk, but your DMP provider is there to help. They can inform your creditors and are often able to negotiate a solution with them. If you regularly miss payments, though, then there’s a high chance your DMP will be cancelled.
Your credit score reflects your chances of getting approved for credit. The higher it is, the better your chances. Lenders calculate your score when you apply for credit, using your credit report, application details and any other information they hold on you (e.g. if you’re an existing customer).
Getting a DMP will usually lower your credit score. This is because you’ll be paying less than the originally agreed amount, which will be shown on your credit report. Reduced payments show you’re having difficulty repaying what you owe, so lenders may see you as high-risk. So, if you apply to borrow money while you’re on a DMP, lenders may reject your application or charge you higher interest rates.
If you’ve been hit with a big unexpected bill, talk to your DMP provider. They may be able to adjust your plan or temporarily reduce your payments, so you don’t need to take on any more debt.
You may struggle to get a mortgage while on a DMP. As mentioned above, a DMP will usually lower your credit score. Having a low credit rating doesn’t make it impossible to get a mortgage, but it does make it harder. It also makes getting a mortgage more expensive, as lenders are more likely to charge a higher interest rate.
Another challenge is saving enough money for a deposit while paying off your debts in a DMP. If you do have enough money for a deposit, it may be worth seeking professional advice as to whether you should use that money to reduce your debts or put it towards a property.
If you already own property, you might consider re-mortgaging to help pay off your debt. This can be difficult with a low credit score, but explaining your situation to lenders may help.
When your DMP ends, you can close the accounts you’ve paid off, or start making full payments again. Your score should recover over time if you continue to meet all repayments. Records of your debts will take six years to drop off your report, but lenders may pay less attention to them as they age.
In the meantime, there are several things you can do to improve your Experian Credit Score. It’s also helpful to check your Experian Credit Report regularly for accuracy, and to see what’s impacting your score.
An individual voluntary agreement (IVA) can help you pay off your debts by combining them into one monthly payment, usually over a period of five or six years. You can also have the option of making a one-off payment, known as a lump sum IVA.
But IVAs are different from DMPs as they are a legally binding agreement between you and your creditors.
A DMP (Debt Management Plan) is an informal debt solution, chosen by those who want to reduce their monthly debt repayments to one single outgoing. While it is an effective debt solution, it does mean that some negative information will still be listed on your credit report.
This is why it’s important you understand how long a DMP can stay on your credit report and potentially impact it.
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DMPs are not listed separately to your other credit products, on your credit report. This is because they are not registered anywhere official, where there is a central source of information. Instead, they may be added as markers to the credit products you are paying off, for lenders to see when they review you – such as when you apply for something like a loan or credit card.So they will stay on your credit file for as long as it takes you to complete them.
The accounts you are repaying your DMP through will already be listed on your credit report, and once the DMP is complete the marker will be removed and the accounts themselves will be marked as closed – they will then remain listed for six years from the settled date. If they are still open, they will be classed as being paid on time and in full.
If you have debts that you are struggling to repay, it is likely that your credit rating is not good, even before you enter into a DMP. However, having a DMP flagged on your credit file does also suggest to lenders that you are a further risk and are paying a reduced amount on the debts that you owe. This means it can be harder to get credit.
A DMP is not a legally binding agreement, so it won’t help if the creditors you are dealing with decide to issue a default against you or increase the fees on later repayments – which can potentially see you get into more financial trouble.
This is why if you have significant debts, which you are struggling to repay, we often suggest taking on another solution instead – such as an IVA (Individual Voluntary Arrangement), which freezes interest and charges and still allows you to benefit from a simple, single monthly repayment. You can read more about Individual Voluntary Arrangements on the site or speak to our team.
While we don’t advise taking on more credit while paying debt via a DMP, we understand that sometimes it is necessary. For example, if you need car insurance or a mobile phone contract – as these are both things that are credit checked.
It’s unlikely you will be rejected for car insurance, this is because providers know that you can simply cancel anytime and so will offer an agreement but perhaps at a higher interest rate – so expect to pay more monthly.
When it comes to mobile phone contracts, you will be credit checked by the company you are applying through. To improve your chances of being accepted we recommend opting for a low monthly cost, the less credit you need the likelier it is you may be accepted. So don’t go for the biggest flashiest phone available!
You will also still need to pay utility bills. Utility providers will credit check you, mainly if you opt to change from pre-payment to paying monthly or quarterly, so bear this in mind.
Finding a new home can feel difficult when you are paying your debts through a DMP, whether you are looking to rent or buy. Here we break down how it can affect you:
Some landlords and letting agents will ask for your permission to perform a credit check on you, when you apply for a rented property, where they will be able to see any defaulted accounts you may have and that you are repaying your debts via a DMP. This may make them less inclined to accept you as a tenant because they will not feel confident that you can pay your rent and bills in full.
However, not all landlords or lettings agents perform credit checks so there is still a chance that you can find a lovely new home, even with a DMP on your credit report!
Getting a mortgage at a good rate can feel tough at the best of times, but with outstanding debts on your credit report your chances are reduced even more. However, some lenders specialise in offering mortgages to people with low credit so it is possible – but you should expect to pay a much higher interest rate.
If you have to take on a DMP though to repay your debts at a lower amount, then it’s unlikely you will also be able to offer a big enough deposit for the mortgage you want.
When your mortgage deal expires, you may want to remortgage to get a better deal but with a DMP and a low credit score you will find it hard to get a good rate. However, if you are unable to remortgage it’s likely that your mortgage provider will just move you onto their standard rate and you can continue paying.
We recommend if you are looking to get a new mortgage or remortgage with a DMP that you work with a qualified mortgage broker – although bear in mind that they will charge a fee for their services – or seek free mortgage advice from a financial expert before you apply for one.
There are actually many positives that a DMP can offer, when you are trying to remove problem debt. These include:
This all depends on your current situation, as well as how much you owe. But a DMP may be a good option for those who:
The debts associated with your DMP may still stay listed on your credit report until the six-year period is up from when they were added – if they have defaulted or there are CCJs associated with them, for example – but the marker for your DMP will be removed.
This may help if you apply for credit but it’s unlikely that your score will dramatically improve simply because the DMP is removed. This is when you will need to think about rebuilding your credit score, which takes time and patience but it can definitely be done! We have a full guide on how to rebuild your credit here on the site, which can help when you reach the end of your DMP and your debts are paid.
If you feel that a DMP is the right choice for you, then here’s how to go about setting one up:
How long your DMP lasts will depend on how much debt you have, and how much you can afford to pay off each month. But it's not unusual for DMPs to last between five to 10 years. If your DMP involves you making repayments less than the amount originally agreed with lenders, then it will affect your credit score.
