An IVA will have a negative affect on your credit rating for 6 years. After that it should bounce back. However, you can take action to improve your score if your Arrangement is completed earlier.
Included in this article:
- How to improve your credit rating after an IVA
- Can you get car finance once your IVA has finished?
- Applying for a mortgage after an IVA
- When will you be able to get a bank overdraft or credit card?
Want help to start an IVA? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
How to improve your credit rating after an IVA
The record of your IVA will drop off your credit file 6 years after the start date. Your credit rating will not be 100% clear until this happens. It happens automatically around 3 months after the 6 year anniversary has passed. It is a legal process and there is nothing you can do to bring forward the date.
However, your IVA may complete before the 6th year anniversary. Many monthly payment IVA only last 5 years. Alternatively you might have paid a lump sum to settle early. If you want to get credit as soon as it has finished, what can you do?
The best option to improve your score is to use a credit repair credit card. You should be able to apply for one as soon as you have your completion certificate.
There are a number of providers including Capital One, Aqua and Vanquis. You will normally be offered a relatively small limit. But this doesn’t matter. You must only use the card for small purchases which you can afford to pay off in full each month. This way you will avoid high interest charges and start building up a record of responsible credit usage on your file.
Using a repair card in this way will massively improve your chances of getting accepted for new credit agreements.
Repairing your credit file before the IVA record comes off your file takes time. You may have to use a credit repair card for 6 months to a year before you see any real difference in your score.
Can you get car finance after your IVA has finished?
The good news is that you should be able to get car finance relatively easily after your IVA is finished. The only problem, is you will probably be restricted to using a so called sub prime lender.
There are a number of these including Blue Motor, Advantage 247, Zuto and Cazoo to name but a few. You should be able to find a list to contact by searching for car finance after an IVA.
Clearly, the downside of these lenders is they will charge a far higher rate of interest than the main stream.
Unfortunately, it will be difficult to get finance from a main stream dealer until the record of your IVA has dropped off your file (6 years from the start date). If you have been using a credit repair credit card for 12 months, this may improve your chances but it is by no means guaranteed.
So if your IVA has finished and you are looking for car finance while the record is still on your file, you are likely to have to use the sub prime market.
The possibility of getting car finance from a main stream lender is extremely low until the record of your IVA has dropped off your credit file. This happens automatically 6 years after the start date.
Applying for a mortgage after an IVA
You can get a mortgage to buy a property or re-mortgage your current home after your IVA is completed. However, your options will be severely restricted until the record has dropped off your credit file.
Once you have your completion certificate, you will want to apply to a high street lender. These organisations will offer the most competitive deals and lowest interest rates. But non of them will work with you until your credit file is clear (6 years from the start date of your IVA). This situation will not change even if you are using a credit repair card.
Given this, if your primary objective is to get a mortgage, think carefully before settling our IVA early. It is unlikely to improve your chances.
There are some sub prime mortgage lenders who may work with you. However they charge far higher interest rates. For this reason, it is advisable not to plan on applying for a mortgage until 6 years from the start date of your IVA.
But if you absolutely can’t wait, you could consider taking a sub prime mortgage on a 2 or 3 year deal. Once this has ended you should then be able to switch to a high street lender. By that time, your IVA record should have come off your credit file.
Even after 6 years, there are relatively few high street lenders you will offer you a mortgage straight away. To find a deal you will normally need to use a specialist broker.
When will you be able to get a bank overdraft or credit card?
You may have been using a basic bank account during your IVA. This is an account with no overdraft or other credit facilities.
For most people, this type of account will be perfectly acceptable. It should work the same as a standard account, giving you facilities such as a debit card and internet banking. However, what if you want to get back to the option of using an overdraft?
Your best option is to speak to the bank where you have your basic account about upgrading. However, they are likely to be reluctant to do this as soon as your IVA is completed. Normally you will have to wait until the record is off your file.
If the record is still on your file but you have been using a credit repair card for a year or so, you may then have a chance of upgrading to a current account. However this is by no means guaranteed. It will depend on the bank.
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