How to Rebuild Your Credit Score After an IVA

When you enter into an Individual Voluntary Arrangement (IVA), you will be advised that the impact of your IVA on your credit file will last for six years regardless of when your monthly payments end. So if you make five years worth of payments into your IVA, it will remain on your credit file for an additional 12 months. This means that you may find it very difficult to obtain credit within this six-year period and possibly for a little while afterwards. 

The completion of an IVA often means that you get a fresh start in terms of your credit history, but what it also means is that you will need to rebuild your credit score from scratch. Read on to find out more about how your credit score will be affected and how you can begin rebuilding your credit after an IVA.

How Does an IVA Affect Your Credit Score?

Many factors can affect your credit score. These can include:

  • Your Payment History If you miss multiple payments or default on your credit accounts, for example.
  • Your Debt Amount If you are using all of your credit limits across several accounts.
  • The Number of Accounts You Hold These can include loans, credit cards and store credit.
  • Public Records These include County Court Judgements (CCJs), bankruptcies and IVAs.

Prior to entering into your IVA, it is likely that one or several of the points above have already affected your credit score, which has caused the need for a formal insolvency solution. So, the initial effects of the IVA will not matter in the early stages. 

Once your IVA is completed, you need to understand that you will not come out of it with a perfect credit score. Rebuilding it and working on gaining a positive credit history will take time, so it is important to be patient and not to be disheartened.

Understanding Your Credit Report

There are three major credit scoring agencies in the UK TransUnion (formerly Callcredit), Equifax and Experian. Unfortunately, there is no standard scoring system in the UK, so your credit score will be different with each one. For this reason, it is important that you understand how to read your full credit report and the factors that affect the score. This will help you to ensure that regardless of the number assigned to you, your credit file is an accurate reflection of your credit history.

What Can You Do to Rebuild Your Credit Score after an IVA?

Once you have received your IVA Certificate of Completion, you should visit all three major credit scoring agencies and request a statutory credit report from each. You can do this online or by post, and they cost around £2. Once you have access to your credit reports, use the tips below to make sure that the information within is correct and up to date as well as using the information to begin rebuilding your credit.

  1. Check your address and contact details. If the information is incorrect, request that it be changed. You must request this with each credit scoring agency, as changing the details with one will not automatically change them across the board.
  2. While ensuring your address is correct on your credit report, it is always worth checking that you are also on the electoral roll with the correct details. The longer you remain at the same address, the more trustworthy and stable lenders will think you are.
  3. If you notice something on your credit report that you disagree with or know is incorrect, you can leave a “notice of correction” with the credit scoring agency in question asking that they correct any information that stands out as being incorrect.
  4. Take this opportunity to have a fresh start and avoid getting behind on repayments. You will see from your credit report that payments made to companies such as mobile phone providers and gas and electricity companies all appear on your credit report, so make these payments on time and in full to avoid them having a negative effect on your credit score.
  5. Don’t make lots of applications for credit in a short space of time. After completing your IVA, it will be tempting to see whether you’d be accepted for credit, but applying for too many or being declined can negatively affect your credit score.
  6. A credit rebuilding credit card can help you improve your credit score if you use it correctly. Try applying for a credit card with a specialist credit card company designed to help improve credit and spend wisely. A great tip is to use the card to do your weekly food shopping and pay off in full every payday. This will show lenders that you are reliable in terms of repaying, and your credit score will, therefore, improve.

Budgeting Your Life after an IVA

You’ve learned all there is to know about budgeting while in your IVA. You’re a budgeting pro now! But, it’s important not to slip back into bad spending habits now that you’ve completed your IVA. Consider taking the spare monthly money and putting it into a savings account to reduce your need to borrow when an unexpected outgoing crops up. If you’re looking for a budgeting too then you can download our FREE personal budget tool in Excel here

If you have an IVA with Debt Movement and are coming to the end of your payment term, please don’t hesitate to get in touch to speak with one of our friendly and experienced guides. We can help you to understand the next stages of your journey to financial freedom.

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