Your Credit Rating After An IVA
The basic starting point when looking at credit ratings after an IVA is to understand what is, and what isn’t, apparent on your credit file. Things that go on your credit file stay there for six years only.
An IVA typically runs for five or six years, so usually the IVA itself will not show up on a credit file soon after the completion of an individual voluntary arrangement.
What Shows On Your Credit File An IVA?
Other things may appear on your credit file which should, or sometimes should not, be there. Examples include default notices and credit balances. The rule of thumb in this respect is that the information on your credit file should be accurate.
That means that soon after you complete your IVA default notices (which should be dated at the start of your IVA or earlier) should be marked as being satisfied or partially satisfied, and balances owing that were included in the IVA should not appear at all. You may have to contact some creditors to request that they update their entries.
With the IVA no longer apparent on a credit report, correctly dated default notices having dropped off as well, and no included debt balances showing, you might assume that your post-IVA credit report looks perfect and that lending will be easy to obtain. This belief is often reinforced by the credit scores that the credit reference agencies assign to people, which are often pretty high in these circumstances.
Post IVA Credit Rating
Sadly it isn’t as simple as that. The basic problem is that lenders don’t solely rely on credit scores, with many making little or no use of them. You may view them as being an indication of prospective creditworthiness after an IVA, but they are no more than that. Lenders have their own processes for deciding who they want to lend to, processes which are based on their commercial priorities and previous lending experience.
For example, positive recent use of credit might be valued by many lenders that are scoring a credit application. Your credit history might contain nothing bad because the IVA was more than six years ago and the default notices and credit balances have been cleared up. But is there anything good there? Is there any evidence of a good track record of payments on credit used recently? Without any recent evidence that you pay your debts on time, possible future lenders may view you as being an unquantified risk.
Differences In Credit Ratings
Have you used a payday loan? Some lenders might see the fact that you’ve used a payday loan recently and paid it back fully on-time as being a good thing. It may make them more likely to lend to you. Other lenders might think that using a payday loan is a sign of financial distress, a sign that potentially you are a poor money manager, and decide that they don’t want to lend to you. In our view making use of payday loans is inherently risky, and particularly after an IVA has ended.
How To Improve Credit Rating After IVA
Therefore, improving your credit rating after an IVA has to work on several levels.
- Firstly you should ensure that your credit report is accurate and reflective of the facts.
- Secondly you may need a little time for things to drop-off six years after the IVA began.
- Thirdly you may need to prove that you are a good lending prospect by making some positive use of credit (though care should be exercised in choosing which types of credit to use).
Improving your credit rating after an IVA isn’t impossible, but it does require a little time and effort to get the job done properly.
By Mona Malik Via Ezine
For more information about life before, during, or after an IVA you may wish to visit IVA Advice Forum. The site is full of facts, information and guides to assist anyone with questions about debt or an IVA in the UK. The sites’ forum is especially useful, it gives you the opportunity to put questions to experts on debt advice and debt solutions. Their experience may be invaluable in helping you to move forwards.