Credit Rating after an IVA

The impact on the Credti Score one of the first concern when come the time to choose a Debt Solution. If you are entering an IVA, you may also have the same question. After reading this guide you will know the complete details how an IVA process affects your Credit Rating. You will also find some important tips to rebuild your Credit Score in the future.

What are the Credit History and the Credit Ratings?

Credit History usually refers to a credit file that contains everything which has happened in ones personal Credit History of the previous six years or so. Your credit file has a complete record of all the applications for loans, every continuing or completed finance agreement, and all the missed or late payments.

Whether you opt for Bankruptcy or IVA, it will stay on your credit file for six years (in some cases Bankruptcy will stay for up to ten years). But once this period is over, it will be automatically removed from your records. A credit file is present at the credit reference agencies, from where a copy can be had by any lending institute.
You can also request for a copy after paying a small fee.

Credit Rating

Every individual in the United Kingdom has a Credit Rating which keeps varying with the time. Though different lenders have different criteria for assessing your Credit Rating but most of the banks and financing institutes consider:

  • Current age.
  • Employment status.
  • Home status i.e. homeowner or living as a tenant.
  • Marital status.
  • Credit History with your current bank.

Credit History is the main factor involved in the Credit Rating; the better your Credit History the more chances you have to obtain a loan!

How does an IVA affect your Credit Rating?

Your Creditors will surely take legal steps against you if you do not make payments on time. The most common approach adopted by the Creditor is applying for a County Court Judgment (C.C.J). C.C.J stays on your credit file for six years from the date of court’s order.

Whenever you enter an IVA, you are issued a Default Notice. The reason for this is that you are breaching the terms agreed upon for the original loan.

The Default Notice also stays on your credit file for six years. However, when you are entering an IVA, your Creditors, usually, will not take legal actions against you as they know it will cost them extra money. IVA normally takes five years to complete and it stays on your credit file during this period.

Will my poor Credit Rating diminish the chances of obtaining any loan during IVA?

During the five years of IVA process you are not allowed to take any further loan. Therefore your Creditor History does not mean anything.

When you pay the last installment you are eligible to obtain loans. However you might find it extremely difficult for one more year after IVA’s completion as C.C.J and Default Notice will be still in your credit file.

Your Credit Rating, however, still has some impact on your circumstances i.e. if someone is checking your Credit Ratings for reasons other than loan. For example, a landlord may check your rating, when you are applying to rent a property. IVA completion can prove to be a benefit for you.
The Creditors may consider your request for loan when they see you have kept a deal for five years.

Will my Credit Rating improve once the IVA is completed?

Yes, your Credit Rating improves once your IVA is over. Your Insolvency Practitioner will issue you a Certificate of Completion. This certificate depicts that you have a clean bill of financial health.

The Insolvency Practitioner will also send copies of this certificate to different Reference Agencies. Upon receiving this certificate these agencies will update their records accordingly, showing that you have resolved your debt problems. Another copy will be sent to the Insolvency Service and they will also update your Credit History.

After completing your IVA you can start rebuild your Credit Rating for the future. However, you should make sure that your Credit History has been updated by getting a copy from a Reference Agency. It is quite possible that some details may be incorrect. In this case you should inform the agencies as soon as possible and get your record rectified.

One last tip – after going through your IVA, you should ask only those loans for which you can pay monthly installments easily!

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