Entering into an Individual Voluntary Arrangement (IVA) is a significant step to manage debt, and it has lasting implications on your credit score. The impact of an IVA on your credit file remains for six years from the date your IVA was approved, irrespective of when your monthly payments end.
This means that obtaining credit during this period and even afterward can be challenging. However, there are ways to rebuild your credit score post-IVA and improve your financial health. Here’s what you need to know:
Understanding How an IVA Affects Your Credit Score
Your credit score is influenced by various factors, including your payment history, debt amount, the number of accounts you hold, and public records. IVAs are one of these public records and typically follow a series of missed payments or defaults that have already impacted your credit score before entering the IVA. Hence, the initial effect of the IVA might not be a significant concern.
However, upon completion of the IVA, it’s essential to recognize that your credit score will not miraculously become perfect. Rebuilding your credit will require time, patience, and perseverance.
Comprehending Your Credit Report
In the UK, three major credit reporting agencies—TransUnion (formerly Callcredit), Equifax, and Experian—generate credit reports.
These agencies don’t use a standard scoring system, so your credit score may vary between them. Understanding your full credit report, including the factors affecting your score, is crucial to ensure it accurately reflects your credit history.
Steps to Rebuild Your Credit Score After an IVA
- Obtain Your Credit Reports:
After receiving your IVA Certificate of Completion, request a statutory credit report from all three major credit reporting agencies. You can do this online or by post, and it usually costs around £2 per report. - Check and Update Personal Information:
Review your address and contact details on your credit reports. If any information is incorrect, request updates with each credit reporting agency. An accurate address is vital for lenders to consider you trustworthy and stable. - Correct Inaccuracies:
If you spot any incorrect information on your credit reports, such as a missed payment that didn’t occur, you can submit a “notice of correction” to the respective credit reporting agency to rectify any discrepancies. - Maintain Timely Payments:
Ensure you pay your bills, including those to mobile phone providers and utilities, on time and in full. Punctual payments will have a positive impact on your credit score. - Avoid Excessive Credit Applications:
It’s tempting to test your eligibility for credit immediately after completing your IVA. However, making numerous applications in a short time or facing rejections can negatively affect your credit score. - Rebuild with a Credit Card:
Consider applying for a credit card designed to help rebuild credit. Use it wisely by making regular purchases, such as weekly groceries, and paying off the balance in full each payday. This demonstrates your reliability in repaying, improving your credit score over time.
Budgeting for Life After an IVA
Budgeting is a skill you’ve likely sharpened during your IVA journey, and it’s essential to maintain prudent financial habits now that you’ve completed your IVA. Consider saving the surplus money you once allocated to your IVA payments. This can help reduce the need for borrowing when unexpected expenses arise.
If you’re nearing the end of your IVA with Debt Movement, our experienced guides are here to support you as you navigate the next steps on your path to financial freedom. Please don’t hesitate to get in touch; we’re ready to assist you in your journey toward rebuilding your financial future.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
