Obtaining credit after an IVA
Once your IVA has come to a successful conclusion, it's likely that you'll want to improve your credit rating.
The best way to do that is to follow this guidance and, in due course, your credit score should rebuild.
Cleaning Up Your Credit File
Your IVA will remain visible on your credit file for 6 years, starting from the date your IVA began.
And so, if your IVA completes successfully within this 6 year period, you may decide you want to update your credit file to reflect this.
Before 6 years
If your IVA completes before 6 years have elapsed since its start date, you'll need to update the system to reflect this.
When the final payment has been made and the closure process has been completed, you will be issued with a Final Report which, amongst other things, contains your Certificate of Completion.
These are important documents.
The Final Report details exactly what happened to all the money you paid into your IVA, including a breakdown of IVA fees and charges that your insolvency practitioner retained for the work they did, along with a breakdown of how much each creditor received as their share of the payments. This is know as their dividend.
Your Certificate of Completion provides you with proof that your IVA has completed successfully and that all the legal obligations placed upon you during your IVA have now been removed.
It's advisable to make a few copies of your Final Report and Certificate of Completion and keep them in a safe place, just in case you need them for future reference.
You should then send a copy of your Certificate of Completion to each of the Credit Reference Agencies (CRAs) listed below:
- Experian: found here www.experian.co.uk
- Equifax: found here www.equifax.co.uk
- TransUnion UK: found here www.transunion.co.uk
Once received, each CRA will update your credit file to reflect that your IVA has been completed successfully, although this can take a few week to process.
Once processed, and if you prefer a 'belt and braces' approach, you should then request a copy of your credit file to confirm it has been updated correctly.
It should be noted that even after the CRAs have updated your credit files to reflect the IVA has been successfully completed, the history of you completing the IVA will remain visible to potential lenders until 6 years have elapsed from your IVA's start date.
This means it will continue to have an adverse effect on your ability to obtain credit from certain 'risk-averse' lenders.
Once the IVA has been updated on your file, it's time to consider rebuilding your credit score.
After 6 years
After 6 years has elapsed from your IVA's start date, any IVA markers will automatically be removed from your credit file, meaning that there will be no mention of the IVA ever having been undertaken and completed successfully.
This is why you should keep a copy of your Final Report and Certificate of Completion, should you need to evidence it in the future.
It is worth noting that you will not suffer any disadvantages by choosing not to update the CRAs, if you simply prefer to wait until your IVA naturally falls off your credit file.
Whichever way you decide, you should still check it has been removed after 6 years have passed from the start date, just in case the automated system fails.
Rebuilding your credit worthiness
This is best done, initially, by making an application for a modest level of credit with a lender that specialise in offering credit to people with a limited credit history.
Obtaining credit via one of the specialist lenders, such as Capital One or Vanquis credit cards, is generally considered a safe place to start.
You might also consider approaching your current bank for a small overdraft, as they'll have a good understanding of your financial housekeeping and are more likely to offer you credit.
Over time, your credit rating will improve as you demonstrate an ability to manage the credit you have, build trust with potential new creditors and show yourself to be credit worthy.