Many people who are struggling to pay back their debts are unsure about entering agreements such as IVAs as they are worried about how it may impact their credit score. The details of your IVAs will be kept on a public register called the Individual Insolvency Register for the length of the arrangement and your credit score may be negatively impacted, however, with a well managed agreement, you can get your finances back on track, helping to improve your financial record in the long run.
If your creditors took action before you sought an IVA, you may also have a county court judgement (CCJ) that will be recorded on your credit file for 6 years from the date it was issued, however, these are usually included in your IVA so you don’t have to worry about paying them both. You can also rest easy knowing that once you are in an IVA, your creditors cannot take legal action against you. As IVA’s typically last between 5-6 years, your CCJ record will be removed from your file soon after you have completed the agreement.
During your IVA you will struggle to get credit, though you may be able to get it for personal household goods and services or business goods and services if you own your own business. Keep in mind that creditors will often charge you higher interest rates if they can see you currently have an IVA, so make sure you only apply for necessary credit to avoid getting into more debt. If you’re looking to get over £500 in credit, you must seek written approval from your insolvency practitioner (unless the credit is for public utilities e.g. gas, electricity) who will decide whether or not it is a risk worth taking.
After the IVA is finished and your details have been removed from the Individual Insolvency Register, you can apply for credit but this will likely prove difficult in the short term. However, by meeting the terms of your agreement and taking steps to improve your credit profile, you can build a better score.
My Credit Score is Still Low, Now What?
If your credit score is still too low to be accepted for a loan, you may require a guarantor. A guarantor is someone who legally agrees that they will repay the money if you are unable to. If you do use a guarantor, you should make sure the person you choose has a good credit score themselves as they will also have to share their details for a credit check.
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