What happens with my credit score if I go into an IVA?
Many debtors tend to concern themselves with what will happen to their credit score if they decide to enter into an IVA. However, if you find yourself in debt then your credit score will already have been affected since any missed payments or defaults on your account will be noted on your credit file by your creditors as and when they occur.
In this article, we look at what will happen to your credit score if you choose to go into an IVA and whether you’ll be prevented from lending again in the future.
1. Your IVA will be formally recorded.
As soon as your proposal has been accepted by your creditors, your chosen insolvency practitioner will inform both the Insolvency Register and your local County Court of the new arrangement. This will then show on your file with immediate effect.
2. The Insolvency Register will update their records.
The Insolvency Register will update their records so that details of your IVA will show on their file. This can be accessed free of charge by any member of public and will show very basic details such as the date you entered into the IVA, your name, address, date of birth and your practitioner’s information. This information will show on the Register for the duration of your IVA and for 3 months afterwards. Thereafter it’ll be removed and will no longer be available for anyone to view (including potential lenders should you choose to apply for credit in future).
3. Your credit record will be amended.
Your credit record will be amended to reflect the fact that you’ve entered into an IVA and this will show on any credit search undertaken by lenders. Whilst you won’t be able to apply for credit whilst you’re in the IVA, these details will appear to future lenders if you decide to apply for credit once your IVA has ended. This information will stay on file for approximately 12 months after the IVA has ended, although it will be shown as satisfied if you’ve maintained your payments in accordance with the agreement.
Will I be able to get credit in future?
Yes. Once you’ve satisfied your IVA you’ll be issued with a certificate of completion by your insolvency practitioner. This means that the IVA has ended and that you’ll no longer be pursued for any remaining debt under it.
However, whilst you’ll certainly be able to apply for credit you must bear in mind that some lenders will require additional security to reflect the amount of potential risk they’re taking on. Some lenders, for example, will ask for a guarantor whilst others will might apply a higher interest rate or simply limit the amount of money you’ll be able to borrow. That said, once you’ve started to demonstrate your ability to borrow more responsibly then there’s certainly no reason why you can’t start to rebuild your financial history much more positively and ultimately, avoid going into debt again.
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