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An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors. It allows you to pay back one monthly affordable repayment and the creditors often agree to write off a certain percentage of your debts. Your credit score is a number that indicates to lenders how likely you are to repay your debt. If you are in an IVA then this will indicate that you have previously not been able to pay back your debts and therefore will impact your credit score.  This article/video will answer your questions about how an IVA affects your credit.

In the video, John Webb from Experian, explains how an IVA affects your credit score, credit report and credit rating.

When does an IVA get recorded on my credit file?

Details of your IVA are legally recorded onto the Insolvency Register which is shared with credit reference agencies. This information on your credit file is updated monthly, so it will appear shortly after the start date of your IVA.

An IVA is recorded on a credit report for 6 years from the day that it starts. If it does get extended beyond 6 years, it will remain on your credit file until it finishes and then drops off. If your IVA finishes after 5 years. It will take another 12 months to disappear from your credit file.

How an IVA affects your credit file

Your IVA will be recorded on your credit file for lenders to see. As it indicates you have struggled to repay debts in the past it is important for the lenders to have this information.

If you are in an IVA, it is important to remember that you cannot borrow more than £500 without your IVA Supervisors permission.
Your employment could be affected, although most jobs do not carry out regular credit checks, if they did then they would require your permission to do so. Jobs that may be affected if you’re in an IVA are:

  • Accountants
  • Bankers
  • Insolvency Practitioners
  • Some public services such as The Police, Fire Service or Prison Service
There are no rules within IVA legislation stating that an employer must know about an IVA unless it is stated within an employment contract – so always check this document.

Will it affect other people that I live with?

No. It is a common misunderstanding that your debt will affect others living in your household. An IVA won’t affect other people you live with unless you have a joint or linked IVA with someone else living in your household.

If you have a financial association with someone else in your household i.e. you have a joint mortgage or a joint account then your credit reports will be linked. You can see who you are financially linked to on your credit score, and if you are no longer linked then you need to contact the credit reference agencies and ask for a financial disassociation.

If you want to know more about how an IVA affects your credit score, then don’t hesitate to get in touch. Ask us a question in the comments below, or drop us a message on Facebook or Twitter.