How Deep Do Debt Management Plans Affect Your Credit Scores?

Debt Management Plans

A good credit report is one of the most significant credentials an individual or business can possess to avail credit from the market. Before any lender or bank approves a loan, they do a thorough check of your credit reference file. This is a record of your payment history, which is maintained by credit management agencies. It includes your current bank details, your performance on repaying past borrowings and if there were any cases of your collateral property being auctioned off due to nonpayment. To know how agencies get access to such details, visit our website for more information. Before investing, you should evaluate the credit history of the company, which you can do through various online portals like www.bankrate.com.

It might be evident by now that because these credit reports have all your details, it will have a reference to any debt management plans you are currently using or have used in the past. The use of DMP might not impact your credit score negatively but it can make your attempt to avail new credit little difficult. Information related to DMP is recorded in credit files at different times and under different circumstances such as:

• In the payment history: Under DMP negotiations, your counsellor might have negotiated a lesser payout to the creditor with mutual consent, but in your report, such debt settlement by your credit agency will show up as a partial payment.
• Marking with DMP Flag: There is an option in the credit report for the creditor receiving payment under the debt management plan to mark it with a DMP flag.
• Marking your file as defaulter: Your creditor may, in case of delayed payment even under DMP, mark your account as a defaulter, which will affect your credit history.
• Details of any past court settlements: In case your creditor has taken you to court for payments disputes in the past, the mention of such judgment will show up on your credit report, even when everything has been settled.

Hence, keeping up with your DMP dues is only a way to present your debt management plan under better light in your credit reference file. The reference to debt management plan will show up on records till you have settled your debt. It is also advisable to stop using your credit cards till the debt is cleared since these additional liabilities will make your situation tougher.

DMP impact various credits you avail such as:
• Renting a house or property: Attempting to secure a home on rent after a DMP settlement may prove to be little tricky. Your landlord will likely review your credit report issued by the credit agencies with your permission. Having a DMP flag or a defaulter flag in case you have skipped out on your payments may put you in a tough spot regarding house rentals.
• A bank mortgage for a new property may seem more tedious if you have been flagged for a DMP recently.
• Day to day commitments like car insurance, phone bills and utilities may also be adversely affected but will nevertheless be manageable.

Whether you are currently fighting against debt or are looking to find a loan, DMP can help make your payments easier and less restrictive on your lifestyle.

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