Will debt management affect my credit rating?

I’m worried that a Debt Management Plan will affect my credit rating

A Debt Management Plan is an informal payment arrangement between you (the debtor) and your creditors (those who are owed the money), and is intended to bring the payments you make to your unsecured debts, such as credit cards, personal loans and mail order catalogues, to an affordable level within your household budget, after ensuring that all of your essential living costs are covered from your income. As a result, it is likely that the amount that is calculated as affordable will be less than the total monthly payments you are required to make to maintain the contractual repayments under the original Consumer Credit Agreements.

It is unlikely that anyone who can maintain these contractual repayments will be considering a Debt Management Plan, and we see from experience that candidates for Debt Management have tried other ways of resolving their money problems beforehand (such as Debt Consolidation loans or direct discussions with the creditors) which have proved to be unsuccessful. Generally we see that clients have already missed a number of repayments to their debts, and/or have had a number of loan applications refused.

In such circumstances, there is little value in worrying about credit ratings, as the ‘damage’ will already be done! Clearly, given the whole point of a Debt Management Plan, such a solution for money problems will not help credit ratings in the short term, but of more importance at this time is the need to bring finances back under control, address the pressure and stresses being experienced, and bring back some normality and balance to life generally, as money problems are an integral part of wider family problems.

With the sound budgeting and realistic payment arrangements which a Debt Management Plan brings to money problems, our experience is that creditors quickly recognise that you are doing your best to repay your debts in difficult personal circumstances. As a result any pressure from the creditors quickly falls away and they become more comfortable with your efforts as you build up a track record of regular monthly payments through your Plan.

At National Money we see a very high level of acceptance of payments from creditors, resulting in a quicker resolution of your money problems than if you had allowed your situation to deteriorate.

Once successfully clearing your outstanding debts through the Debt Management Plan, your credit rating will start again to improve, though defaults etc regarding your debts will stay on your credit file for 6 years.

To discuss your situation further, call our experts at National Money on 08448 247 260

Or ask us any Debt Management questions using the form below: