If you miss or reduce the payments you make to your creditors even as part of a Debt Management Plan agreement, your credit rating will become worse.

If you start a Debt Management Plan, you will pay less to your creditors each month than you originally agreed. It is therefore highly likely that they will view your account as being in default and issue you with a default notice.

Your creditors will record that you have a missed payment and any default notices they issue on your credit file. This will cause your credit rating to become worse.

How long will my credit rating be affected?

Once you stop paying your creditors in your DMP, default notices wil be recorded in your credit file, they will remain there for 6 years. During this time, all late payment records and default notices will show up if anyone carries out a credit check against you. This is very likely to stop them from lending you more money.

After six years if your debts are still outstanding you may still find that your credit rating remains poor and you continue to have problems borrowing more money. Your credit rating will really only begin to repair once all of your outstanding debts have been settled or paid in full.

Wouldn’t my credit rating be affected anyway?

If you are struggling with debt and you are no longer able to pay your creditors, your credit rating will be affected whether you start a Debt Management Plan or not.

Getting a poor credit rating is not a result of doing a Debt Management Plan. It is the result of not making your agreed payments to your creditors.

As such, if you are in a position where you are unable to afford to pay your creditors and cannot help but miss your normal payments to them, worrying about your credit rating should not be the primary factor to consider when deciding whether to do a Debt Management Plan or not.

Improving your credit rating

If you believe that your credit rating is already poor or you have been refused credit and do not know why, have a look at the BeatMyDebt.com 'Improve My Credit Rating' guide. This guide will help you understand why you have a problem and what you can do to improve your credit rating. You can also get a free credit report here.

To access the guide See the 'Related Links' box below.

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More Information: Expert articles

To read articles about Debt Management Plans written by our experts please click on the expert articles and news link in the 'Related Links' box above.