Life after debt management

27 April2021
Check credit score and finances

You've completed your debt management plan: you've paid off your unsecured debts and had the celebration. What next? Now that the brakes are off, what are your goals for your financial future?

A lesson learned?

Many people finishing a debt management plan promise themselves that they'll never take on any borrowing again. However, if you've been struggling along with the same ancient car or holding back on home improvements, you might be yearning to reward your efforts with a long-awaited 'treat'.

Before you throw caution to the winds remember that debt management will have affected your credit rating and you may have to wait a while before any defaults drop off your record. What's more, lots of applications for different types of credit all at once can make lenders wary. It's better to apply for the credit you really need and not get sidetracked by anything else.

If you realise that you need to apply for credit, click here to find out more about loans .

Check your credit record

Before considering any credit it's always advisable to check your credit files are correct and up to date. Check every detail as even something as simple as an address that wasn't updated when you moved house could affect your credit worthiness. Make sure that you aren't a victim of ID fraud too, by checking that all the agreements and entries on your report really are yours.

If you ever find any mistakes on your report, contact the lender - and if necessary, the credit reference agency - immediately. They should make sure the file's amended for you.

You can also add a 'notice of correction' to your report to explain why a negative entry's in there - because you were ill and unable to work for a while, for example.

It may be worthwhile to check the information held by the other credit reference agencies too so you can ensure their records are accurate.

Click here for more information on credit ratings and credit reference agencies .

Improve your credit score

Now that you've paid off your debts, it's important to improve your credit rating, just in case you do need to apply for credit in the future.

  • Ensure you are on the electoral roll and consider getting a landline if possible. This helps potential lenders confirm your address and identity and shows you're not always on the move.
  • Always try to make sure that you make any future debt payments on time - every time. If a lender sees missed or late payments on your file they might assume you'll miss more in the future.
  • Don't apply for credit you don't think you can get as this can affect your credit score.
  • Cancel old credit cards you're not using.
  • has a credit checker tool that you can use to see the impact different things can have on your score.

Don't fall into the minimum payments 'trap'

If you are considering getting a new credit card, remember that by only paying the minimum payments asked for each month you'll take a lot longer to pay back the debt and you'll be paying a lot more too, thanks to interest. Set up a Direct Debit for more than the minimum monthly payment if possible: that way you'll always be paying more than the minimum amount and should clear your debt sooner.

If you think you'll need a credit card, it's important to get the best deal that's available to you. Click here to see different credit cards

Image iStockPhotos / YinYang

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Tags: debt, debt management, debt management plans, spending, credit rating, money, advice, loans

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