An IVA is a form of debt solution that was designed to reduce monthly repayments into one payment plan that can be paid off over an extended term. They’re typically a great solution for escaping debt that has the potential to lead to bankruptcy, but also have the side effect of adversely affecting your credit score after IVA.
Your credit score after IVA
Your credit rating is your personal financial footprint, which holds a record of all of your past credit and payments, which can help to assess your eligibility to borrow from lenders in the future. However, if your credit score is riddled with missed payments for bills or loans, then it will be noted against you – adversely, any payments that are made on time can help to improve it.
Your credit score is most affected by the amount of loans or credit cards you have had over time – your rating would be weak if you’ve never had any kind of credit in the past, but would be strong if you had credit cards and loans that you never missed any payment on.
Unfortunately, having an IVA does leave a negative mark on your credit rating, but it isn’t permanent! In most situations where someone needs an IVA their credit rating isn’t particularly good anyway, as it will usually involve missed or late payments, while using an IVA will be able to improve your credit score in the long run. Through this you will have the chance to pay off debts you owe and you can start fresh with a new score to your name.
Your credit during your IVA
While you are a part of an IVA you will find it particularly difficult to take out any new credit (and this can even last for a short while after the agreement). However, there are always certain exceptions to situations like this, including:
- If you own a company, or you’re self-employed and you need access to credit for your business
- If you’re using credit for any of your living essentials or for specific purposes that relate to your families wellbeing.
However, you’ll usually find that your credit rating is worse than it typically is during the IVA, which means that if you are able to take out any new credit then the interest you’ll be charged will be much higher than usual.
If you’re hoping to take out any credit that exceeds £500 during your IVA then you will have to get written permission from your IP, unless you need the credit to pay utility bills.
What long term effects will be left on my credit score after IVA?
There will be a record of your IVA on the Insolvency Register until your agreement is finished, and it will remain as a mark on your credit rating for six years after the date of the beginning of the agreement. You should always keep these aspects in mind when applying for credit in the future, as even once your IVA is done you’ll find it more difficult to receive reasonably-priced credit.
If you need help managing your debt and are aware that an IVA could be helpful to you, then you should get in touch with one of our agents at Consumer Rights to ensure that you’re managing your debt with a reliable solution. A member of our team will be happy to contact you to talk through the aspects of an IVA with you and determine your eligibility for an agreement – so don’t wait to get in touch.