Can I Get a Credit Card While on a Debt Management Plan (DMP)?

Q: Can student loans, payday loans be included in DMP?

It depends. Furthermore, I wouldn\'t put student loans, payday loans on the plan. Such kinds of debts are incorporated as costs in your own financial plan and you should pay these straightforwardly.

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Understanding if you can get a credit card while on a Debt Management Plan (DMP) is an important question. You’re not alone in asking this.

Every month, over 170,000 people come to us for advice on debt solutions. We know how it feels to worry about whether a new credit card can affect your DMP and we’re here to guide you.

In this article, we’ll cover:

What a Debt Management Plan is and how it works.
How to know if you qualify for a DMP.
How your current credit cards can be affected by a DMP.
If your spending habits are watched by your creditors.
If getting a credit card while on a DMP is a good idea.

We have a team with a deep understanding of debt matters, as some of us have even been through similar situations and know how you feel

Let’s dive into the topic and help you make an informed decision about getting a credit card while on a DMP.

Will I be Approved for New Credit Cards While I’m on a Debt Management Plan?

Whether you get approved for a new credit card while on a DMP depends on several things.

For instance, you are dealing with your debt and therefore your credit score should improve over time.

A potential creditor might view this positively, but each lender has their own lending policies. For example, some lenders might let you make deposits to your savings account while on a DMP, whereas others might demand payment to any outstanding debt you have first.

If you are a student, Debt Management Plans won’t stop you from getting a government-backed student loan since they don’t check credit reports or credit history to assess who qualifies.

However, lenders will check your credit file.

As such, I suggest you seek advice from a debt expert first.

See this message posted on a popular online forum about a debt management plan.

Source: Moneysavingexpert

Points to keep in mind while looking to Open a New Credit on a Debt Management Plan

Acquiring a credit card while on a DMP is a high-risk decision that requires careful consideration.

For the most part, it isn’t advisable.

I suggest you consider the following before getting a credit card when you’re on a DMP:

Are you experiencing difficulty making your current instalments on time?

Would adding more debt while you’re trying to pay off your old debt warrant further getting more credit?

Will your creditors see that you getting more into debt?

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Some debt solutions can:

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Situation

Monthly income	£2,504
Monthly expenses	£2,345
Total debt	£32,049

Monthly debt repayments

Before	£587
After	£158

£429 reduction in monthly payments

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Will my already existing credit cards get shut down on a DMP?

First things first, if your DMP contains any credit cards under its working mandate, they will be closed.

Here’s the way it works — the creditor, which is normally a bank or other lender sets up a DMP. You could incur fewer charges on your credit accounts.

Fewer fees and charges are mutually beneficial for you and the creditor. You pay lower rates making it simpler to pay your balance.

Plus, the creditor gets paid.

However, one of the conditions for offering a lower loan rate is that you cancel your credit cards.

Remember – the provider who regulates your debt management plan can only request you cancel your credit cards in the first instance.

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What does it mean to have a credit card on a DMP and can I be sensible about it?

Getting a credit card means acquiring credit. In short, having a credit card on a DMP means acquiring further credit upon debt.

Let’s say you buy a vehicle that you need for your work while you are on a DMP. You’ll pay higher interest rates because of the DMP.

You should consider buying a less expensive vehicle. For example, a low-mileage vehicle that’s cheaper to run.

The impact of DMP on lifestyle means managing finances more carefully.

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Wrapping it Up

For some individuals, a debt management plan is an option worth considering when struggling with debt.

Using a credit card while a DMP is in place may lead to further financial hardship.

A DMP provider may let you keep a credit card for emergency use only, but it’s at their discretion whether to leave the card out of the agreement.

I suggest you seek advice from a debt adviser if you’re considering applying for a new credit card while a DMP is in place.

FAQS

Is a DMP right for me?

Yes and No. This depends on the situation you’re currently in. I wouldn’t necessarily imply you do not have a DMP, or even otherwise. Do you think it is a better alternative to other points you have considered.

Does a DMP affect my credit file? (hint: yes it does)

Yes, DMP does affect your credit file. Since a credit file shows to you the types of debts you have, a DMP can have a direct impact on it, and allow for consideration into some spheres over others. A DMP essentially prioritises some types of debts over others.

Can my credit file improve because of a DMP?

Yes, it does. This is contingent upon if you’re making regular payment on clearing your dues. Possessing a DMP directly affects your credit file, if it is maintained in a manner which is advised with good debt advice.

Can student loans, payday loans be included in DMP?

It depends. Furthermore, I wouldn’t put student loans, payday loans on the plan. Such kinds of debts are incorporated as costs in your own financial plan and you should pay these straightforwardly.

Can I open new lines of credit while enrolled in a DMP?

Not opening new credit extensions until the current debt is cleared is a safer option. Vehicle and house credits are special and might be fundamental while joined up with the DMP.