Improving your credit score after a DMP

A Debt Management Plan (DMP) can make a hugely positive difference to your life. But like any debt solution, it has a negative impact on your credit score.

Particularly if your DMP is due to end in 2019, you might be thinking about improving your credit score once it ends. In this post we’ll look at three steps you can follow to do just that, once you’ve completed your DMP.

your credit score

Step 1: Check your report is accurate and complete

You can check your credit report for free with each of the agencies: Call Credit (via Noddle), Experian and Equifax (via Clearscore). Remember, they may all have different information. It’s worth checking 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.

You can also make sure that you’re on the electoral roll. Lenders will check this as part of their fraud checks on your identity and address. Check that your current account, and any other financial products you own, along with your passport and driving licence are all registered at your current address.

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

There are an increasing number of products and services you can use to build your credit score without actually taking out credit.

Do you rent your home? The Rental Exchange, RentalStep, CreditLadder or Bud can ensure your rental payments are reflected on your credit report. This will help you improve your credit score if you pay your rent on time and in full each month.

Some utilities companies also report your bill payments to credit reference agencies. You can find details of which ones do so under 'Utility bills' here. 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 the opposite is also true – if you miss payments they will also show on your credit history.

If you have enough money to be able to commit to saving regularly, you could also try LOQBOX. This is a savings account which reports your regular deposits to the credit reference agencies as repayments on a loan, thus improving your credit score.

Step 3: Show you can use credit responsibly

There are 2 main ways to do this:

- Make all your ongoing payments on time.

- Manage your bank account responsibly. Make sure you have enough money in your account to cover outgoing payments.

Taking out a credit card can also improve your credit score - as long as you use it carefully. Lenders want to know that you can borrow sensibly and responsibly. 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 is best)

- pay off the balance in full every month

- and 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. Some lenders can perform a ‘smart search’ or ‘QuickCheck’, to check if you’re eligible for their product without leaving a mark on your credit file.

However, the best way to keep your credit record looking healthy is to use the budgeting skills you developed during your DMP. That way your essential payments will be covered every month, and you may be able to build up savings. That way you won’t have to rely on credit.

Don’t forget that your credit report changes every month; and information is only held for six years. So every month, some old information will drop off and a new month’s data will be added. If you follow the steps above, your score could start improving in a matter of months. Keep going!

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