Your Credit Rating and an IVA

Your Credit Rating and an IVA

Starting an IVA will affect your Credit Rating. It will make your credit score poorer and mean getting further credit is difficult until the Arrangement is over.

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How will an IVA affect your Credit Rating?

Your credit rating will be affected if you start an Individual Voluntary Arrangement (IVA). Will starting an IVA make your credit rating worse then it is now? How long will it be until your credit rating starts to improve? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement/how-iva-will-affect-your-credit-rating

How long is your Credit Rating affected by an IVA?

As soon as your IVA starts a record of it is added to your credit file. This will show up each time anyone carries out a credit check against you. As a result most applications for credit you make will be rejected.

The record will remain on your file for 6 years from the start date. This is a statutory period and cannot be changed. After this time it will come off automatically.

Once your IVA is completed there are various things you can do to start improving your credit rating. This is the case even if the record has not yet been taken off your file.

You cannot reduce the length of time the record of your IVA stays on your credit file. It will remain for 6 years from the start date even if you complete the Arrangement early.

Can you borrow during an IVA?

Once you are in an IVA you are not allowed to borrow more money without the agreement of your Insolvency Practitioner (IP). Generally speaking they are unlikely to let you do this.

If you run into financial difficulty there are different ways your IP can help without borrowing more. They can allow you to take a break from your payments. If your income has reduced permanently your payments could be reduced.

It may be possible for you to borrow from a doorstep or payday lender. You should avoid doing this. It will reduce your ability to maintain your monthly payments and could result in the whole Arrangement failing.

Do not borrow more while you are in an IVA. If you are struggling financially ask your IP about a payment break.

Can you use a Mobile Phone and other Utilities during an IVA?

You can continue using your current mobile phone contract as long as the monthly payments are reasonable. The contract will not be affected by your IVA and the provider will not be informed.

At the end of your mobile contract you should be able to renew with the same provider. However you will not be able to change providers unless you use pay as you go. Your poor credit rating will mean that you are likely to fail their credit check.

If your mobile contract is not affordable you could stop paying and include the outstanding debt in your IVA.

Your home utility agreements will also be unaffected. You can continue using the same gas and electricity providers and paying your bills as normal. The companies will not be told.

Utility bill arrears can be included in an IVA. If you do add them you will normally be able to stay with the same provider and simply continue paying your normal ongoing bills.

Getting a Mortgage during and after an IVA

You cannot normally remortgage your property during an IVA. The one exception is if you are looking to release equity to settle the Arrangement early.

In addition you may be able to remortgage in the 5th year of the Arrangement to honour your equity release clause. There are some lenders who may be prepared to lend to you for this reason.

Once you have completed your IVA there are increased options for getting a new mortgage. However you will normally have to wait for the record to come off your credit file before you apply.

Want to speak to a specialist mortgage broker about your options for getting a mortgage? Give us a call (0800 077 6180) or complete the form below.

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