IVAs and Your Credit Rating

Credit during your IVA

Most IVAs contain a clause stating that you should not seek further credit of more than £500 (except for utility bills, such as gas and electricity) without the prior consent of your IVA Supervisor. This clause clearly restricts your ability to obtain credit without the Supervisor’s agreement.

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If you do take out credit without the IVA Supervisor’s knowledge and permission, you will be in breach of your terms and conditions – and this could lead to the failure of your IVA.

Your Supervisor may give you permission in certain circumstances to obtain further credit – for example for a replacement Hire Purchase (HP) arrangement, or a re-mortgage if your fixed rate is coming to an end, etc.

However, the Supervisor will be keen to make sure that this additional credit doesn’t have a detrimental effect on your IVA and your ability to keep up with your agreed monthly IVA payments. 

While the amount of additional credit you are usually allowed to take out during an IVA is fairly restricted, most people find it difficult to obtain any further credit during this period anyway. This is because your IVA will appear on your credit reference file for six years from the date your IVA was originally accepted by your creditors, and for longer if the arrangement lasts more than six years.

Creditors will typically check your credit record when you apply for credit. Due to this, you are likely to find it difficult to obtain credit during your IVA without paying high interest rates. This, in turn, may affect your ability to continue to make your agreed monthly IVA payments.

Your IVA will also appear on a public register called the ‘Individual Insolvency Register‘ for the duration of your IVA. Credit reference agencies will check this register regularly and update your file accordingly, so you are very likely to struggle to obtain further credit while you’re in your IVA.

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Credit rating after your IVA

Upon completion of your IVA, your Supervisor will inform the Insolvency Service, who will the update the Insolvency Register.

The Insolvency Service will then let the credit reference agencies know that your IVA has been completed. Upon receipt of this information, a note will be added to your credit file.

Whilst all the right people have been alerted and your credit record states that the IVA is over, your IVA will stay on your credit file for 6 years from the date it began. If your IVA was only 5 years long, it will stay on your record for a further 12 months after you’ve completed it.

This means you will experience difficulty getting further credit – and if you do find a lender who is prepared to offer you credit, you’ll be seen as high risk, and you’re likely to face higher interest charges as a result.

It is recommended that you use the money-saving and budgeting tips you’ve learned during your IVA to create savings, rather than relying on credit.

For more information about this visit our life after an IVA page.

Once your IVA has been completed, it is possible to improve your credit rating.

Here’s are some tips to help you do this:

  1. Request a copy of your credit report The three main credit reference agencies are Experian, Equifax and CallCreditYou can get a credit report from any of them.
  2. Check the credit reports to make sure that all the details are accurate. If they aren’t correct, you can contact the relevant credit reference agency and ask them to file a ‘notice of correction’.
  3. Check the start and end dates of your IVA on the credit reports to make sure they are correct. If they aren’t, notify the credit reference agencies.
  4. IVAs and Default Notices stay on your credit file for 6 years from the date they were approved – therefore, file a ‘notice of correction’ if any of these are showing on your credit file for longer than 6 years. If there is a Default Notice issued after the date of your IVA by one of the creditors included in your IVA, you can contact the credit reference agencies to have the Default Notice back-dated to the approval date of your IVA. 
  5. To improve your credit score, make sure you are on the Electoral Register, and if not, contact your local council to request this.
  6. When you have had financial difficulties and haven’t applied for credit for some time, it will take a while for your credit rating to gradually improve. .

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