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IVA Impact on Credit Score
An Individual Voluntary Arrangement (IVA) is a debt solution designed for those struggling to repay their debts. Rather than repaying the full amount, an IVA allows you to make manageable payments over a set period, helping you regain financial stability.
While an IVA does impact your credit score, so does having unpaid debts. If you’re struggling to keep up with payments, an IVA might be the fresh start you need. Instead of dealing with mounting debt and missed payments, an IVA helps you take control and work toward becoming debt-free.
Setting up an IVA means agreeing to repay a manageable portion of your debt over a set period, usually five to six years. At the end of the agreement, any remaining debt covered by the IVA is legally written off. This structured approach allows individuals to regain financial stability while avoiding more severe consequences, such as bankruptcy.
How does an IVA Affect Your Credit Score?
An IVA is recorded on your credit file, which lowers your credit score. However, if you already have missed payments, defaults, or County Court Judgments (CCJs), your score may already be impacted. An IVA helps you deal with debt in a structured way, which can be beneficial in the long run.
- Your credit score will drop once the IVA is recorded on your credit file.
- Lenders may see an IVA as a sign of financial difficulty, making it harder to get credit.
- Any new credit over £500 requires approval from your Insolvency Practitioner (IP).
- Some landlords and mortgage lenders may be cautious when assessing applications.
- Credit card providers and loan companies may reject applications during the IVA term.
While your credit options will be limited, using this period to build better financial habits can help in the long term
How Long Does an IVA Stay on Your Credit File?
An IVA stays on your credit file for six years from the start date, even if you complete payments early. This can make borrowing money more difficult during this time, but once it’s removed, you have the opportunity to rebuild your credit profile.
- The IVA remains active for five years, limiting borrowing options.
- After six years, it is removed from your credit file.
- Once removed, lenders will no longer see the IVA when assessing applications.
- Completing the IVA earlier does not remove it from your credit file sooner.
While an IVA can make obtaining credit difficult during this period, once removed, you can begin working toward a healthier financial future.
Steps to Rebuild Your Credit After an IVA
Rebuilding your credit after an IVA requires patience and careful financial management. Taking the right steps can improve your credit rating over time.
- Check your credit report to make sure the IVA has been removed correctly.
- Register on the electoral roll so lenders can verify your identity.
- Pay your bills on time to show lenders you can manage money well.
- Maintain a healthy financial balance by keeping your spending within your means.
- If you take out new credit, ensure repayments are affordable and always made on time.
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Adam Southard is authorised as a Licensed Insolvency Practitioner in the United Kingdom by the Insolvency Practitioners Association, We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meet the criteria for one of our insolvency solutions, therefore, all advice regarding Individual Voluntary Arrangements (IVA) is given in reasonable contemplation of an insolvency appointment.
Adam Southard is licensed to act as an Insolvency Practitioner in the UK by the Insolvency Practitioners Association. Office Holder No. 11930
Insolvency Practitioner Directory- Insolvency Practitioner Details (bis.gov.uk)
What you need to know about Individual Voluntary Arrangements
(Insolvency Service)
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