IVAs and your credit rating

Thursday 30 May, 2019 Individual Voluntary Arrangement

Credit score during an IVA

Most lenders will default your account as soon as you enter into an IVA, however it is entirely at the lender’s discretion as to when they do this. In some cases, this can take some time.

An IVA will have a significant negative impact on your credit score and overall creditworthiness while it is reported on your file and you are likely to have extreme difficulty obtaining further credit during this time. Most lenders will automatically decline your application if an insolvency is present on your credit report whether it has been discharged or not.

If you wish to obtain more than £500 credit then you must get written permission from your insolvency practitioner, unless it is for public utilities such as gas, electric and water etc.

Details of your IVA are considered public information and it will be listed on the Individual Insolvency Register, therefore the concept of debt will be no secret from any potential creditors.

Credit score after successfully completing an IVA

Your IVA will stay on your credit file for six years from the day it started. If your IVA was five years long then the record of it will only stay on for a further 12 months after the IVA ends. The same is true even if the IVA fails or if you have completed the IVA early.

Details of your IVA will remain on the Insolvency Register for the duration of your IVA and will be removed three months after your IVA has come to an end. Aperture will request this is removed from the Insolvency Register when we issue your completion certificate.

Once you complete your IVA Aperture will issue your completion certificate, normally 3-6 months following your final IVA payment & after all obligations have been made. We will also contact your creditors to let them know the IVA has successfully been completed. It is then their responsibility to update the relevant credit reference agencies.

The completion certificate issued to you upon closure of your IVA is proof that you have completed your IVA successfully and you keep this in a safe place as you may need it in the future.

You can credit check yourself using the three main credit reference agencies. These are:

These companies will provide you with your current credit report. It is probably best to wait a couple of months following the completion of your IVA to ensure that your creditors have updated their own internal records as well as external records as this can take some time.

How to improve your credit score

It may be a good idea to start by checking exactly what is on your credit file and make sure that all information is correct. You can check your credit score on websites like Experian, Equifax and Callcredit and compare these all against each other. Ensure there is no adverse information dated after the beginning of your IVA, as there should not be any new information after this date.

How to repair your credit score

1) Build up your credit history - Having little or no credit can make it difficult for a company to assess you. A credit history is a record of how you use credit, such as when you’ve applied for it, whether you’ve paid it back and how much you currently have access to.

2) Prove where you live - Register on the electoral roll. This is a good idea as lenders are able to verify who you are and make you appear more stable.

3) Open a bank account- Managing it shows companies you’re financially stable. If you have an overdraft, make sure to stay well below the limit and try to pay it off as quickly as possible.

4) Get a credit builder credit card - Your bank may be willing to give you a credit card if you have no credit/bad credit. Paying it off on time will help you to build a positive credit history and improve your score. Be careful not to go overboard with this!

5) Get your name on utility bills – Utility bills such as your phone contract or your electric bill as these count as a form of credit. Paying these off and keeping up to date with monthly payments help to improve your credit score.

6) Pay your bills on time – We are only human and it is often easy to loose track of what payments are due when. In order to stay on track it is a good idea to set up a direct debit with your bank for certain bills as this means the money is withdrawn and transferred to the lender on the same day of every month. You can relax and your credit score is better for it. Another way to help pay your bills on time, is by using a Budgeting App... which will allow you to easily keep track of what you have spent, and what you need set aside for certain bills.

The Rental Exchange

Experian have partnered up with Big Issue Invest to create The Rental Exchange to help tackle the challenges faced by rental tenants in the UK in comparison to home owners. This project aims to incorporate a tenant’s payment history in their credit file, therefore observing rental payment data in the same way that mortgage payment data is viewed. This will unlock a range of benefits for tenants by enhancing their credit score given that payments are timely and for housing providers and credit providers.

If this is something of interest to you, be sure to ask your landlord to report your rental payment data into the Rental Exchange.