What Should I Do After My Debt Management Plan is Over?
A debt management plan (DMP) is an excellent way to accelerate your debt repayment and save money in the process. Once your program is completed you'll be free from credit card debt, but you may wonder whether or not you should start using credit again, or how to begin strengthening your credit score.
If your DMP is completed, here are some next steps to help maximize your financial potential.
Pull a Copy of Your Credit Report
After your final creditor payments have been made through the DMP, you should visit AnnualCreditReport.com and grab a free copy of your credit report. There can sometimes be a lag between when payments post and when creditors update their reporting to the credit bureaus, so you may want to wait 45 days or more before accessing your report.
Once you've got your credit report, you'll want to make sure that there are no errors, including items that shouldn’t be there or any incorrect information. If you find any, these can be disputed and will be removed if determined to be incorrectly reported. Errors on your credit report can be costly, so be sure to take this step!
Open a Credit Card Account
As part of your debt management plan, all credit card accounts are typically closed, which means that most DMP clients exit the program without any open credit cards to their name. While you may prefer to just skip using credit from here on out, it's difficult to continue building strong credit without actually using credit.
If you're worried about overspending, it may be best to open an account with a small balance. Use the card for set household expenses and pay off the balance each month. You don't need to carry a balance to help build your credit score, so paying off your balance in full is the best way to avoid interest charges and not run the risk of creating new debt.
Update Your Spending Plan
The monthly deposit for a debt management plan can be significant, especially if you're paying back a sizeable amount of debt. Now that your program is over, where does that money go?
Even if you're not big into budgeting, it's a good idea to reconsider your spending and create a plan for your money. Now's a great time to focus on building your savings nest, either for a future emergency, a big picture goal, or retirement.
Having a sudden influx of available cash is exciting, but without a plan you run the risk of spending thoughtlessly and turning your new surplus into a deficit.
Set Your Next Goal
Having a goal can help guide your decision-making, and provide focus for your new spending plan. Whether it's buying a new home, starting a business, or just planning your next vacation, having something to work towards can make money management much more rewarding.