Covid Payment Plan (CVPP)

While you’re on a CVPP your credit file will reflect this and show that you’re making reduced payments.

Creditors may report that the account is subject to a ‘forbearance arrangement’ or under a ‘debt management plan’. This reassures anyone looking at your credit file that you’re making reduced payments as part of a plan.

It does mean that your credit rating is likely to deteriorate during the time you’re on a CVPP. As you’re making reduced payments, your score will not deteriorate as quickly as it would have if you had failed to make these payments.

This will show on your credit file for six years from the date it was added.

Of course, because the credit rating will be affected, the more you pay now and the sooner you can return to making your full contractual payments, the lesser the impact will be.

Credit providers have an individual approach to how they will view the impact of this on your credit score, but your ability to take out new credit may be affected.

At the end of your CVPP, you may wish to take steps to improve your credit rating. We’ll provide you with helpful tips on how to improve your rating towards the end of your plan.

Credit commitments

To be eligible for a CVPP, you must be able to pay a reasonable amount of what would be your normal contractual payments. Credit commitments include:

- Credit cards

- Personal loans

- Store cards

- Pay day loans

- Catalogue accounts

If you have a guarantor loan, or a debt jointly owed between you and another person, your creditor may ask the loan’s guarantor or the other person to repay the debt.

Priority arrears

Some debts are a priority because the consequences of not paying them are greater than the consequences of not paying others.

For example, if you don’t pay your rent or your mortgage you could lose your home. You must always pay these before your other debts.

Priority arrears must be paid in full within the 12 months of your CVPP. These include:

- Council tax

- Water

- Gas

- Electricity

- Rates

- Other priority arrears not connected to housing or assets

It’s important that you continue to maintain all payments to any:

- Commitments you’ve not told us about

- Essential household bills, such as your mortgage or rent and utility bills

- Child support you pay

- Court fines you have outstanding

- Taxes you must pay

Not maintaining these payments could result in action against you.

Your creditors could try to recover the debt, you may lose access to essential goods or services or the goods could be repossessed.

You may be evicted if you don’t keep up to date with your mortgage, secured loan or rent payments.

If you have an overdraft on your existing bank account, you should aim to reduce the balance on this during the course of your CVPP. While there’s no ability to add an overdraft to a CVPP, reducing an overdraft reduces any interest and charges you have to pay for it, to positively help your financial situation.

The following debts can't be included in a CVPP:

- Mortgages and mortgage arrears

- Rent and rent arrears

- Secured loans

- Overdrafts

- Hire purchases and hire purchase arrears

- Benefit overpayment repayments

- Fines

- Taxes

- CCJs / decrees

- Child maintenance arrears

- Insurance arrears

- TV licence arrears

- Business debts, including credit cards and loans used for a business

There are other options available to you if you have debts that can't be included in a CVPP.

If you're struggling to make payments towards these debts, you should speak to your creditor as soon as possible.

You can also use our online debt advice tool to find the right solution for your situation.

We'll work this out for you during your application, from what you have left over after your essential household costs are accounted for. We'd recommend you pay as much as you can afford through a plan.

To help you get back on track sooner, it’s important that you don’t increase your borrowing while you’re on the plan, by taking out new credit products or spending more on your current credit commitments.

If your income shows a lasting improvement during the term of a CVPP, you can increase the amount you pay, which will help you to return to making your normal monthly payments sooner. Contact us to arrange this when your financial situation improves.

You should end your plan sooner if you’re able to make your normal monthly payments to your creditors, or when you decide you no longer need it. This may help reduce the impact on your credit file.

You won’t be able to make additional, one-off payments to the plan.

If your financial situation gets more difficult and you find you’re struggling to make your monthly payment, get free debt advice as soon as possible. We’ll work with you to find your best long-term solution.

It isn’t permitted to miss or reduce your monthly payment to the plan. If you’re unable to make a payment towards your plan you must get in touch with us, as your plan will close. We’ll review your situation with you, find a solution you can afford, and cancel the plan.

The amount you owe your creditors at the end of the plan may have increased from what you owe them now.

Your creditors will expect you to repay any outstanding arrears on the money you owe after the end of your plan. You’ll need to talk with your creditors towards the end of your plan to arrange how you’ll repay the arrears. This may be done by increasing your monthly payment to them, or increasing the term of your arrangement.

Your creditors may continue to charge interest on the money you owe while the plan is in place. To reduce the amount of interest you may have to pay, we recommend you pay as much as you can afford through your plan.

If you have a guarantor loan, or a debt jointly owed between you and another person, your creditor may ask the loan’s guarantor or the other person to repay the debt.

If any of your creditors don’t freeze interest or charges on your account while you’re on a CVPP, your payments may only cover some or all of the interest, rather than reducing the amount you borrowed. That will mean your debt may be increasing. If this happens on any of the accounts listed in your CVPP, you should contact your creditor to understand how the payments you’re making to us are affecting your account with them. When you have this information, you may need to consider whether a CVPP is still the right option for you.

Credit providers have different approaches to how and when they issue default notices and how they’ll view the impact of this on your credit score. This means that depending upon the contributions you make to your creditors, they may still choose to record this as a default and could take further action. This may include legal action, selling the debt and/ or stopping further credit from that source. It may also impact your ability to obtain credit elsewhere. To understand what your creditors may or may not do you should contact them directly.

You should not ignore communications from your creditors during the length of your plan.

If you complete the plan successfully, you’ll return to making normal monthly payments to all your credit commitments, and pay your creditors directly.

You’ll find that some of your payments may have risen because of interest, charges and arrears that may have been added to your account, as you'll still have debts remaining at the end of the plan.

You’ll need to contact your creditors towards the end of your plan to come to an arrangement to repay any interest, charges and arrears. Your lenders will discuss this with you and may include increasing your monthly payment or increasing the term of your arrangement.