For people entering into a debt restructure agreement such as an individual voluntary arrangement one of the main concerns will be how it will affect their credit rating and whether they will be put on a ‘blacklist’ by lenders.
Firstly it is important to clarify just what is meant by ‘credit rating’. Every adult in the UK will have both a credit rating and a credit history. A person’s credit rating sometimes called credit score is made up of a number of factors and will vary between lenders. Therefore the credit rating of an individual will differ every time they make an application for credit. Criteria used when calculating a person’s credit score will typically include their age, employment status, marital status and previous credit history.
All banks and financial institutions will refer to credit history, also known as credit file, when determining a person’s credit rating. The credit file basically contains everything that has happened in an individual’s personal credit history in the previous six years. The file will include every application for credit, current and completed finance agreements, and any missed or late payments. The two main credit reference agencies in the UK are Experian and Equifax. Anyone can get a copy of their own credit file by applying to these agencies online
If you do enter into an individual voluntary arrangement then this agreement will appear on your credit file as part of your credit history. Once your Individual Voluntary Arrangement (IVA) has been successfully completed, your Insolvency Practitioner will give you a Certificate of Completion. You should send this to credit check agencies and request that they update your file to include that your IVA has finished. They will make a note on your credit file stating that you are debt free in the eyes of the credit agencies, as you have successfully repaid all of your debts through the Individual Voluntary Arrangement (IVA).
Therefore after five years the Individual Voluntary Arrangement (IVA) will have finished, and there will be no more outstanding debt. However, because the Default Notices and CCJs will stay on your credit file for six years, there will still be one more year to go before your credit file will be completely clean. During this final year you will be able to apply for credit, should you wish too, but there is the possibility that you will find obtaining credit difficult, though not impossible. In effect an IVA will have an impact on your credit rating for six years but this won’t necessarily mean that you will be denied credit.
IVA Advice are a group of independent financial advisors providing debt consolidation advice to people in the UK. Use our online IVA calculator to find out if applying for an IVA is the best solution for you.
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