Buying a home after your Debt Management Plan

We sometimes ask our customers whether they think they’ll borrow money again in the future. Many customers tell us that they’d rather achieve their financial goals by saving, rather than borrowing. But the exception is when it comes to buying a house.

Unless you win the lottery, it’s almost inevitable that you’ll need a mortgage if you want to buy a home. So will that be possible for you after your DMP? Read on for a better idea of your options.

The deposit

If you are looking to buy a home, you will almost certainly need to put down a deposit to get a mortgage. This will be 5% of the house price at the very least, and more usually 10%.

Most customers tell us they find it difficult to save during their DMP. So it’s unlikely that you’ll be very far along in the process of saving up your deposit when your DMP ends. But the money you’ve been spending on your DMP payment each month will then be yours to do what you like with. You could divert that payment into a savings account, and keep up the budgeting skills you’ve been using during your DMP. This could make it much easier to save after your DMP than before.

If you’re confident of being able to save the same amount every month, you could also consider saving part of your money with LOQBOX. This is a clever way to kill two birds with one stone. It’s a savings account which reports your regular deposits to the credit reference agencies as repayments on a loan. As long as you make a deposit on time every month, your credit history will improve.

Speaking of which…

Your credit history

Like any debt solution, your DMP will have a negative impact on your credit score. This can make it harder and more expensive to get a mortgage.

But it is possible to rebuild your credit history over time. There are three main things you need to do:

1: Check your report is accurate and complete

You can check your credit report for free. There are three credit reference agencies: TransUnion (formerly known as Call Credit), Experian and Equifax (via Clearscore). Remember, they may all have different information. Check them all to ensure that the details they hold are correct. If some details are wrong, you can contact the agencies to get them corrected.

The debts you have paid back in full through your DMP should show as ‘debt satisfied’. Any debts that you settled for less than the total owed may be marked as ‘settled’ instead. Any defaults will be on your credit history for six years from the date they were defaulted. So, depending on how long your DMP has lasted for, they may have already dropped off it.

Remember to register to vote! Lenders will check the electoral roll as part of their fraud checks on your identity and address. Make sure all your documents and financial products are registered at your current address. This includes your passport and driving licence, but also things like your current account and mobile phone.

2: Use your rent, bills and savings to build your score

There are an increasing number of ways to build your credit score without actually taking out credit.

Do you rent your home? You may be able to have your rental payments reflected on your credit report. Check out The Rental Exchange, RentalStep and CreditLadder. This will improve your credit score if you pay your rent in full - on time! - each month.

Check whether your utility providers report your bill payments to credit reference agencies. If you use one of these firms and keep up to date with your payments then that will help you build a positive credit history. Remember that if you miss payments, that will be reflected on your credit history too.

3: Show you can use credit responsibly

Lenders want to know that you will be sensible and responsible with their money. The best way to demonstrate this is to keep managing your finances as carefully as you did during your DMP. That way your ongoing payments will be made on time, and your credit report will show that you’re managing your bank account responsibly.

Another option is to take out a credit card. This can improve your credit score as long as you use it carefully. Once your DMP has ended you could apply for, for example, a credit builder credit card. This could improve your credit score if you:

  • keep the balance as low as possible (under 50% of the limit)
  • pay off the balance in full every month
  • make your payments on time. Not maintaining at least the minimum payment on your credit card can have a negative impact on your credit file.

Don’t forget that whenever you apply for credit, this is recorded on your credit report. If you are turned down for credit, or if you make many applications in a short period, this will suggest to lenders that you’re struggling financially. So exercise caution when you apply.

When you’re ready to start thinking about a mortgage, it may be worth speaking to an independent mortgage broker to find a mortgage provider willing to consider customers who have been on a DMP. You may have to pay slightly more for a period, but if you keep up your repayments after a few years you’ll be able to move to a cheaper, more mainstream lender. Visit Unbiased to find a qualified and regulated mortgage advisor. And don’t forget you can find more information about how to improve your credit score on our website here.

Need expert help with your debts? Complete our form to request a callbackRequest a callback
  • 0161 669 8925
  • 0161 669 8925

Articles home

Top of page

What solutions are available?
Complete the form and our friendly advisor will call you back to discuss the best way forward.

Your total debt?


Just a few more details before we calculate your results

Go to final step
Go to final step

We just need a few more details

Please remember, the form above is just an information tool. One of our advisors will be in touch to answer any questions you may have and offer you more personalised advice on how to resolve your debt problems.
About us

We've been helping people get out of debt for almost 20 years. Read more about what we do and the charities we support.

Read more
Fees & key info

Read more about the fees involved with each of the solutions we provide.

Download the Insolvency Service guide to dealing with creditors.

Read here for information about our Complaints Procedure and referring a complaint to the Financial Ombudsman Service.

Conditions Apply. Repaying your debt over a longer period of time can increase the total amount to be repaid. Your ability to obtain credit will be affected. Fees are payable when continuing service is provided.
Top 5 tips for
beating debt

Read our top 5 expert tips on how to beat debt and deal with your lenders.

Read more