How will a debt management plan affect my credit rating?

23 August2010

All debt solutions have their advantages and consequences. A debt management plan could really help you if you`re struggling with debts you can no longer afford to repay - but remember that failing to make the repayments you originally agreed will have an impact on your credit rating.

However, this might not be avoidable. If your debts have become so difficult to manage that you can`t afford to meet all of your agreed repayments, then your credit rating is probably already being affected.

In this situation, whether or not a debt management plan is the right option for you is a more relevant point to consider.

Why does a debt management plan affect my credit rating?

As you are unable to afford your agreed repayments, you`ll be asking your lenders to accept an amount that is less than was originally agreed - meaning you`ll effectively be missing some of the payments you were supposed to make. This will be recorded on your credit history, as may the debt management plan itself.

Records on your credit history remain for six years. Unfortunately, this means your credit rating will be affected for six years after any adverse information is recorded, and this will make future borrowing more difficult. Should I be worried about the impact on my credit rating?

Nobody wants to end up with a poor credit rating, but if you are unable to afford to meet your debt repayments, it`s more important that you get the help you need as soon as possible, as this will help to prevent unnecessary costs and potential enforcement action. After all, any debt solution which involves reducing your repayments or writing off some of your debt will have a negative affect on your credit rating.

With that in mind, you should accept that your credit rating will be affected, and focus on which debt solution is going to be right for you. There are a number of factors that can affect how suitable a solution is for your circumstances, so always make sure you get advice from an expert.

Try our debt solution finder

Answer a few simple questions and find out which debt solutions could help you, based on your circumstances.

Your Situation

Your Details

Please remember, this is just an information tool. We would always recommend you speak to a debt advisor for the most appropriate way to resolve your debt problems.
We'll give you an on-screen recommendation and call you. One of our advisors will be in touch to answer any questions you may have about your results.
Your privacy is important to us. All correspondence is held in the strictest confidence and we will only request information required to find your debt solution.

Tags: debt, debt management plan, debt management, credit rating, credit score, credit report

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.

Calls may be recorded for training and quality purposes. Calls to 0800 numbers from BT landlines are usually free, but you should check with your network provider for full details of your service.

All About Money Limited © 2014. Registered Office: Think Park, Mosley Road, Trafford Park, Manchester, M17 1FQ. Co Reg No. 4926097. Registered in England and Wales. Authorised and regulated by the Financial Conduct Authority in respect of consumer-credit related activities and is an appointed representative of Think Insure Limited, FCA registration number 310071, and Think Loans and Mortgages Limited, FCA registration number 310069, both of which are authorised and regulated by the Financial Conduct Authority in respect of their insurance mediation and regulated mortgage activities. Regulated by the Claims Management Regulator in respect of regulated claims management activities.