House Blacklisted by a Debt Management Plan
If you start a Debt Management Plan your credit rating will be negatively affected. As a result you will find it much more difficult to get credit personally. But how are the other people you live with affected? Is your house blacklisted? Will you ever be able to get credit again?
- Your house will not be blacklisted if you start a Debt Management Plan
- Other people living with you will still be able to get credit
- How to get a mortgage while you are in a Debt Management Plan
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A Debt Management Plan will not leave your House Blacklisted
It is important to understand that a Debt Management Plan (DMP) will have a negative impact on your personal credit rating. The Plan is informal and not recorded on the insolvency register. However your creditors will issue default notices against you. These will be recorded on your credit file for 6 years.
But starting a DMP will not leave your house blacklisted. It is a common myth that if you have a poor credit rating this will somehow affect the property you live in. This is not the case. A property itself does not have a credit rating. It is your personal credit file that is affected. If you move your credit rating will move with you. The house itself is left unaffected.
DM4U Tip: Should you be concerned if you move into a property and discover that the previous residents had credit problems? The answer to this is no. Your credit rating cannot be affected by a third party who used to live in your property.
Are the other people living in your House Blacklisted?
If you have a poor credit rating this does not blacklist other people who live at the same address. Their ability to get credit is not affected by your Debt Management Plan. This is because everyone has an individual credit file. The fact that you have a poor credit rating does not mean that this will rub off on other people.
The reason why the blacklisting myth has come about is that it is possible for the credit reference agencies to make mistakes. Sometimes a negative record from your file is copied to the file of someone who is living with you in error. If this happens it could cause a problem if they apply for new credit. There is a particular risk of this if you share the same surname.
Having said that if a mistake like this happens it is relatively easy to fix. The innocent party simply has to inform the credit reference agency and request to be disassociated from your debts. The agency must comply with this request under the Data Protection Act. Anyone living with you can easily check for issues like this by getting a copy of their credit file.
Getting Credit or a Mortgage if you start a Debt Management Plan
Although a Debt Management Plan will have a negative effect on your credit rating you can get credit again in the future. Generally speaking you will not be able to borrow more on an unsecured basis until your Plan is finished. However it is possible to get a mortgage during a DMP.
DM4U Tip: If you are already a home owner you might want to release equity from your property to settle your Debt Management Plan early. There are mortgage lenders who will lend to you during the Plan as long as you have maintained your payments on time for the last 12 months. However you will need to get advice from a specialist mortgage broker.
It is not sensible to try and take more unsecured credit until your DMP is finished. If you have a financial emergency you might be tempted to borrow from a Payday lender. However it will be difficult to repay this new debt and maintain your Plan payments. As such a better way to manage a short term cash requirement is to agree a payment break from the Plan.
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