Rebuild your credit score

Do you worry about how your Debt Management Plan is affecting your credit score? Have you wondered what you can do to rebuild your credit score for the future? If so, you’re not alone. Customers ask us questions about this all the time.

Like any debt solution, starting a Debt Management Plan will bring down your credit score. Your DMP itself won't appear on your credit file. However, if you haven’t already been sent Defaults by some or all of the lenders in your plan, you are likely to once your plan is underway. That’s because you are paying less that your originally agreed repayments each month. Any Defaults will stay on your credit history for six years after they are issued.

Should I worry about my credit score?

Yes and no! Taking on more debt during your DMP would be a bad idea, even if your credit score wasn’t an issue! Most of our customers tell us that they want to avoid getting back into problematic borrowing habits in the future.

But you might want to apply for credit again after your DMP in order to buy a home or car. Naturally, customers making these sorts of plans for their future might worry about the damage to their credit score.

The real work to rebuild your credit score starts once you’re debt-free. But you can make a start right now. There's a way to boost your score by 50 points, and it takes no more than five minutes, online. Read on to find out how it’s done.

Registering to vote

The five-minute trick to boosting your credit score is simple: register to vote! You’re legally required to register, even if you don’t plan to vote. But make sure you’ve registered at your current address.

Also, make sure this is the same address that you use for your bank account. This will boost your credit score as well as reducing your risk of fraud.

This is because, if you’re on the electoral roll, it’s easier for lenders to verify your address and your identity. This makes lenders more confident about the idea of lending money to you, and as a result your credit score goes up.

According to the Debt Camel blog, this boosts your score with Experian by a huge 50 points. (We can't guarantee that you'll definitely see your score go up by this much, as it depends on your circumstances. Also, the other credit reference agencies work the scores out slightly differently. But registering to vote will improve your credit score with all of them.) You can read more about this on Experian’s website. On this page Experian point out that if you do apply for any form of borrowing in the future, being on the electoral roll will save time on your application.

Don't forget, your score won't change straightaway: it's usually updated every month.

Other things you can do now for a better credit score after your Debt Management Plan

Check your credit reports

Make sure there’s nothing inaccurate on there that is affecting your credit score. You can check your credit report for free.

There are three credit reference agencies: TransUnion (formerly 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.

And don’t worry - although actual credit applications do affect your credit score, just checking your report has no effect.

Pay your bills on time

Staying on top of all your current financial responsibilities now will help demonstrate that you’re someone lenders can trust in the future.

Don’t forget that if 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 on time, and in full, each month. Check out our previous blogpost for more about how to use your rental payments to build your credit score.

Some utilities companies also share information with credit reference agencies about whether and when you pay your bills. Check with your providers to see if they do this. If they do, and you keep up to date with your payments, this will help you rebuild your credit score. But remember the opposite is also true! If you miss payments, this will also show on your credit history.

Rebuild your credit score by saving

If you have enough money to be able to commit to saving £20 or more each month for a year, you could also try LOQBOX. It’s a savings account that works like a loan. Or maybe it’s a loan that works like a savings account...

Either way, the payments you make into your LOQBOX account are reported to the credit reference agencies, just like credit repayments. If you make your deposits on time and in full every month, LOQBOX say you’ll start to see your credit score go up after about four months. And at the end of a year, you’ll have at least £240 saved up.

It’s a win-win, credit-score-boosting alternative to regular savings accounts. You may remember reading about it in the regular savings accounts article we sent out in our last customer newsletter. Why not think about giving it a try in the New Year to start saving for Christmas 2020?

Rebuilding your credit score after your Debt Management Plan

Once your Debt Management Plan comes to an end, you’ll have a clean slate. It’s an opportunity to press the reset button on your financial situation and start again.

At this point you should check your credit report again. 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. As we said, 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.

The best way to rebuild your credit score is to keep managing your money like the budgeting ninja you’ve become during your DMP. That way your credit report will show that you’re managing your bank account responsibly. And even more importantly, all your essential payments will be made on time.

Credit builder cards

Another option is to take out a credit card. This can help rebuild 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 credit limit)
  • pay off the balance in full every month, so you never pay any interest. The interest rate on credit builder cards tends to be relatively high, as by definition they are designed for people with a poor credit score
  • make your payments on time. Unless you make at least the minimum payment by the due date, your credit score will suffer.

Don’t forget that whenever you apply for credit, this is recorded on your credit history. If you are turned down for credit this will suggest to lenders that you’re struggling financially. The same may happen if you make a lot of applications in a short period. So exercise caution when you apply for credit.

What else can I do to rebuild my credit score?

There’s more information on our blog about how to continue rebuilding your credit score. But in short: once your DMP comes to an end, you can really start to work on improving your credit score if that’s what you want to do. Between now and then, focus on:

  • getting through your DMP
  • doing what you can to maintain your financial wellness
  • and building positive habits around spending, saving, budgeting and planning.

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

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