Struggling with debt can be overwhelming, but an Individual Voluntary Arrangement (IVA)
offers a structured way to regain financial control. While an IVA can help you settle your
debts and protect you from creditor actions, it does have implications for your credit score.
Understanding how an IVA affects your credit score can help you make informed decisions
about your financial future.
In this blog post, we’ll explore the impact of an IVA on your credit rating, what it means for
your ability to borrow money, and how you can rebuild your credit after completing an IVA.
What is a Credit Score?
Your credit score is a numerical representation of your financial trustworthiness, used by
lenders to assess your ability to repay loans or credit. It’s based on your credit history,
including how much debt you have, your repayment habits, and any previous credit
agreements.
In the UK, credit scores are provided by agencies like Experian, Equifax, and TransUnion.
Scores range from poor to excellent, and a high score typically means better access to credit
and lower interest rates.
How Does an IVA Affect Your Credit Score?
When you enter into an IVA, it is formally recorded on your credit file and has a significant
impact on your credit score. Here’s how:
- IVA Registration on Your Credit File
Once your IVA is approved, it will be listed on your credit file under public records. It stays
there for six years from the date the IVA is approved, regardless of whether you complete it
earlier. - Lowered Credit Rating
An IVA signals to lenders that you’ve struggled to manage your debts, which lowers your
credit score. While it might make accessing new credit difficult, this is a necessary step to
regain financial stability. - Difficulty Obtaining Credit
During your IVA, and potentially for a short time after it ends, lenders may view you as a
high-risk borrower. This can result in:
Higher interest rates on loans and credit cards.
Limited access to certain types of credit, such as mortgages or car loans.
- Reduced Debt-to-Income Ratio
While your score drops, your overall debt reduces as you make payments through the IVA.
Over time, this can improve your creditworthiness once the IVA is completed and removed
from your credit file.
Can You Access Credit During an IVA?
In most cases, your IVA agreement will restrict you from borrowing more than £500 without
the approval of your insolvency practitioner (IP). This ensures you stay on track with your
repayment plan.
What Happens to Your Credit Score After an IVA?
Once your IVA is completed, and six years have passed since the arrangement began, it will
be removed from your credit file. At this point:
Your credit score won’t automatically return to its previous level, but you can start
rebuilding it.
Lenders may still see evidence of your IVA in internal records or through the
Insolvency Register (which removes your name three months after your IVA ends).
Rebuilding Your Credit Score After an IVA
Although an IVA can have a long-term impact on your credit score, there are steps you can
take to rebuild your financial reputation:
- Check Your Credit Report
Regularly review your credit report to ensure all details are accurate. Once your IVA is
complete, ensure it is marked as “satisfied” and removed after six years. - Pay Bills on Time
Demonstrate responsible financial behaviour by consistently paying your utility bills, phone
contracts, and rent on time. These payments show lenders that you’re reliable. - Use Credit Responsibly
Consider applying for a low-limit credit card or credit builder card and use it sparingly. Make
small purchases and pay off the balance in full each month to establish a positive credit
history.
- Avoid High-Interest Debt
While it may be tempting to take on new credit, avoid payday loans or high-interest debt, as
these can further damage your financial stability. - Register on the Electoral Roll
Being registered to vote can help improve your credit score, as it makes it easier for lenders
to verify your identity.
How We Can Help
At our private firm, we specialise in helping individuals navigate the IVA process and regain
control of their finances. If you’re worried about the impact of an IVA on your credit score,
our experienced team is here to provide guidance and support tailored to your unique
situation.
We can:
Help you decide if an IVA is the right debt solution for you.
Support you throughout the IVA process to ensure it’s manageable.
Offer tips and resources for rebuilding your credit after completing your IVA.
Is an IVA Right for You?
While an IVA can temporarily affect your credit score, it also offers a path toward financial
freedom by addressing unmanageable debt. If you’re struggling with repayments and need a
structured solution, an IVA may be the right choice.
Take Control of Your Finances Today
If you’re considering an IVA or need advice on managing your debts, get in touch with us for
a free consultation. Together, we can explore your options and help you take the first step
toward financial stability.