Ask the Expert: Do I Need to Wait 6 Years After My DMP?

At Just Mortgage Brokers, we often help prospective homebuyers with adverse events on their credit records find competitive mortgage deals. We were recently contacted by an individual who had been in a debt management plan (DMP) for 3 years and who had made a full and final settlement to clear the DMP. Having cleared the DMP, the individual wanted to know whether they might be able to arrange a mortgage in the near future, or whether they would have to wait for 6 years for the DMP to be removed from their credit history before applying for a mortgage. These are the factors we helped them consider…

How does a DMP affect a credit file?

The presence of a DMP will unfortunately almost always lead to negative information being registered on your credit file and this can make it more difficult to secure credit in the future. A number of different types of negative information could be stored on your credit file. That includes:

• The fact that partial payments are being made towards debts;
• A ‘DMP flag’ to act as a marker that payments are being made through a debt management plan;
• Details of any defaults;
• County Court Judgements (CCJs) and any other court action.

These details will stay on your credit file for up to 6 years and can impact your ability to access affordable credit.

Improving your credit rating after a DMP

Just because evidence of the debt management plan stays on your credit file for 6 years, that does not mean you can not do anything during this time to improve your credit rating. If you are planning to apply for a mortgage or get a good deal on a car loan after a DMP, there are a number of steps you can take to improve your credit score. That includes:

• Accessing your credit report and identifying the areas you need to improve;
• Making sure you are listed on the electoral role;
• Avoiding opening joint accounts with a partner with a bad credit rating;
• Applying for small amounts of credit once you are debt free to build up a history as a consistent payer;
• Keeping applications for credit products to a minimum;

Applying for a mortgage after a DMP

Even with evidence of the DMP still on your file, it is possible to apply for, and secure, a competitively priced mortgage. Improving your credit rating as much as you can will make the process easier, but there are also a number of other factors lenders consider when making a decision. That includes everything from your employment status and earnings, to any other debts you owe and how long you have lived at your current address. Another key consideration is the amount of deposit you are able to put down or alternatively the amount of equity you have in your property. At Just Mortgage Brokers, we work with specialist ‘bad credit’ lenders who are prepared to consider more than just an applicant’s credit file when deciding whether to approve a mortgage. The result, in many cases, is competitive bad credit mortgages for those with less than perfect credit ratings. For more information, please get in touch with our team.