An IVA and my credit rating
One concern people express when considering entering an IVA is the impact the IVA will have on their credit rating.
But, because this question is considered one of the disadvantages of an IVA, it can be difficult to get a straight answer.
So, to help you, here's a brief explanation of how an IVA will affect your credit rating and what you can do to keep the damage to a minimum.
Damage To Your Credit Rating
The first thing that needs to be confirmed is that an IVA will damage your credit rating for a total of 6 years, starting at the date of your Creditors' Meeting.
Once an IVA has been approved at the Creditors' Meeting, it prohibits any further legal action by your creditors. As a result, the IVA ought to be the last bad marker put on your credit file for the full duration of the IVA.
Check for credit rating errors
Occasionally, and particularly when a creditor was already in the process of taking legal action prior to your IVA being agreed, your credit file might receive a Default Notice or a County Court Judgement (CCJ) after the IVA has started.
This is an error, as the IVA is supposed to stop any legal action in its tracks but, fortunately, it can easily be rectified by pointing out the error the Credit Reference Agency concerned, who will then remove the offending marker.
It pays to remain vigilant during the initial year of your IVA and keep a watchful eye on your creditors, to ensure that any actions taken are recorded correctly. Otherwise, you may find that your credit file is damaged for longer than it should be.
Remember, if a Default Notice or CCJ is recorded with a date later than your IVA Creditors' Meeting date, it is an invalid entry and should be removed.
The bigger picture
Many people find the fact that their credit report will be damaged by an IVA difficult to accept. They feel that having access to credit is a necessity and they find it difficult to see the bigger picture.
The truth is, having a 'Triple A' credit score is often found to be why the debts were able to rise to uncontrollable levels in the first place.
Furthermore, most people in an IVA would probably agree that, after some initial adjustments, living without credit is actually pretty straightforward, particularly after the financial pressure of maintaining high debt repayments had been removed.
Finally, and rather obviously, because an IVA removes the need for credit, there's no longer any need for a 'Triple A' credit rating. No loan applications, no credit checks, so no need for a 'Triple A' credit rating.
After your IVA
Your Insolvency Practitioner will give you a Certificate of completion when your IVA finishes.
You will need to send copies of this certificate to the Credit Reference Agencies with a request for them to up date your credit report accordingly.
In the majority of cases, once the IVA completes, there will still be 12 months to wait before the IVA falls off your report. During this final year you will be able to apply for credit, should you wish too but, even though you are actually debt free, getting credit will be almost impossible.
After this final year, there will be no mention of your IVA on your credit file and from this position you will be able to rebuild your credit score should you wish to.
