How long does a debt management plan affect your credit rating?

Mortgage Broker
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How long does a debt management plan affect your credit rating?

One of the best possible steps you can take when smothered by debt is to address it head first. After all, when we ignore problems such as these, they typically grow.

There are many ways to help you slowly lift out of your debt problems. For some it may take months, others years, but what matters is that you do in fact initiate that first step forward. 

It is known that in some cases, the presence of debt can indicate further issues. One such problem involves marks against your credit score, which is often reduced by missed credit payments, outstanding debts, as well as reflecting the record of any County Court Judgements (CCJs) made against you.

Debt management services and charities can help you begin the process of contacting creditors and settling your accounts. Often, a thorough debt management plan is needed to consolidate and contribute to creditors more easily. 

Some are hesitant to initiate this process however, as they believe it may affect their credit rating even more. But is that what actually happens? Here we answer that question:

What is a Debt Management Plan (DMP)?

A debt management plan is a consolidation of debts, often negotiated on your behalf by a service or charity. Through this service, interest is paused, and a repayment plan is agreed upon for a singular monthly payment. This helps reduce the burden of fees and stress that comes with managing so many debts – slowly helping you make headway in your goals.



Can a DMP affect your credit score?

The one downside of agreeing to a DMP is that it can affect your credit rating for as long as you are paying off your debts. However, rebuilding your credit after the fact is much easier when you have no debts to worry about. Furthermore, consistently missed payments and debts can affect your credit score in the first place, and so it might be that the disadvantages of debt are already being felt quite significantly. 

Will my credit rating stay low forever?

A credit rating is a malleable figure that many different credit rating services judge themselves. It is a figure that estimates your responsibility, affordability, and trustworthiness as a lender. Luckily, just as this credit score can be affected by poor financial handling, it can be boosted by on-time payments and managing your debt. Roughly every seven years your credit score will no longer weigh old debts and missed payments against your credit rating.

What if I need a mortgage with low credit?

Now that your financial house is in order and your debts are addressed, it’s worth considering what options are available to you. With Airborne Mortgage Solutions, you’ll see that bad credit mortgages are more than feasible and can provide you with your dream of owning a starter home.

While the terms might not be as favourable as they would be given the increased level of risk on behalf of the lender, they are more than reasonable and can ensure one hiccup in your financial past need not dictate your prospects for the future. Contact Airborne Mortgage Solutions now to talk through your options with a mortgage advisor Leicester!