Countless debtors have found a debt solution through an Individual Voluntary Arrangement. An Individual Voluntary Arrangement or IVA is a formal agreement between a debtor and his or her creditors. An IVA states that the concerned debtor has to pay back his or her unsecured debts within a definite period. The benefit of an IVA is that you can make flexible payments, but it’s not without financial risks. Among the cons of an IVA, the effect on credit rating is one of the most noticeable. If you have applied for an IVA or are going to apply for it, then you should be aware of this downside. An IVA can affect your credit rating, and it might make it difficult for you to get new credit.
Let’s see how an IVA can result in worsening the credit rating.
How does an IVA Affect the Credit Rating?
When your IVA gets approved by your creditors and insolvency practitioner, it gets recorded in your credit report. As a consequence, your credit rating gets worse. It leads your credit rating to a lower score, and a low credit score indicates that you need to struggle with borrowing money.
For instance, if you apply for a loan, mortgage, or credit card, the creditor will sneak into your credit information. After reviewing your credit rating, they will decide whether to lend you money. If your credit score is not that bad, then they might let you borrow money.
However, the presence of IVA in your credit report shows that you have struggled before to repay the money. Hence, they might judge you as a high-risk borrower, and you might not get credit. Along with this, the creditor might charge you a higher interest rate.
What are the restrictions if you want to take a Credit During an IVA?
Applying for credit when an IVA is running actively in your credit report is possible. As you have already seen, the creditor might apply a higher interest rate on the new credit. On the other hand, there might be an upper limit on the credit that you can borrow from the creditor. With every credit application, you are risking your credit rating to get lower.
However, you can apply for a credit or loan, but make sure that they are suitable to your financial circumstances. Keep in mind that you have to inform your insolvency practitioner if you want to apply for a credit equal to or greater than £5000.
According to the latest changes, a debtor can get a credit worth £500 with written approval from his or her insolvency practitioner. Additionally, since your IVA was approved, there might be special restrictions on drawing credit for five to six years.
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If you think that an IVA is confidential, then it’s not. The details of your IVA appear on the public register or the Individual Insolvency Register. Any of your creditors can search for your finances and credit report if they want to. Anyone can access the register. However, creditors will most likely search for it.
How Long Should the IVA Stay on your Credit Rating?
An Individual Voluntary Arrangement is likely to stay for five to six years if there has been no complication. The IVA is most likely to get over within that timeline, but it won’t get erased from your record. The credit report will mention the IVA as complete and make sure that all debts under your IVA might be mentioned as separate entries.
Ways to Improve Credit Score after you Apply for an IVA
After you have successfully achieved an IVA, it’s risky to apply for a credit or loan. If you are consistent with the IVA payments, the credit score will improve as the IVA gets older. This happens because your creditor pays attention to how you’re paying recently.
Here are a few tricks to improve your credit score furthermore.
- Try to pay your utility bills such as electric, gas, and mobile phone bills on time. All these are kept track of on your credit report. So, don’t take chances with them.
- Keep an eye on your credit report. Therefore, you can catch any inaccurate information at once.
- Register yourself on the Electoral Register.
- Take care of your budget and future spending planning.
Does your IVA Damage Your Partner’s Credit Rating? Talk to the Experts
If you don’t share a financial association with your partner, then your IVA won’t leave an impact on his or her credit rating. Otherwise, your IVA can harm their credit rating as well. Additionally, it won’t damage the credit ratings of those living with you until and unless they have any financial association with you.
To know more about an IVA, you can contact our financial experts. Our experienced professionals can help you with the right piece of information and debt advice on CALL : 03338803165
