An IVA will affect your credit record, but all is not lost.
An IVA is a formal arrangement with your creditors to agree reduced repayment of your debts, in which you declare yourself insolvent. As such, it marks the breakdown of your relationship with the lender.
What is the Insolvency Register?
The arrangement will be entered on the Insolvency Register, which is open to public scrutiny and can be found here: https://www.insolvencydirect.bis.gov.uk/eiir/.
From the Insolvency Register the Credit Reference Agencies will note this arrangement and will include it in your credit records for prospective lenders to see.
Can my debtors log my debts on the register?
Individual lenders might also enter late or missed payment markers and lodge a default as bad as it sounds, you want that default as it has a finite life and will, eventually, disappear.
All debts included in the arrangement should be marked as ‘defaulted’, with the ‘date of default’ being on, around or even before the date the IVA was put in place. Some lenders will leave it at that, but some might report this default every month, they can only actually default each debt once, these repeated entries are merely reminders of the original default, not new defaults.
How long will a default stay on my credit file?
Now, a default remains on your credit files for six years from the date of default, which, as we have seen, should be around or before the start date of the IVA.
This means, on its 6th anniversary, the default and all its reminders will fall off your report. The IVA itself will also fall off at this point, assuming it has been formally completed.
Occasionally an IVA will run longer than six years, in which case it will drop off the reports when it does complete and come off the Insolvency Register.
Should I check the default dates on my credit report?
It is important these default dates are correctly recorded as the actual defaults (along with the IVA itself) will keep your credit score at rock bottom until they are removed.
It is a good idea to keep an eye on these things yourself, during your IVA, using free online services such as Clearscore or Credit Karma.
Where can I get copies of my credit report?
You can get copies of your Statutory Report from the credit reference agencies direct, via their websites. Different creditors report to different agencies and records can vary between them, so it is important to keep an eye on all of them.
Currently the three main UK Credit Reference Agencies are: Equifax, Experian and Transunion.
What if there is a mistake on my credit report?
If something is incorrect, for instance if a creditor hasn’t marked the account as in ‘default’ or used the wrong default date this needs to be amended.
The agencies themselves will not amend these for you. You will need to contact the relevant creditors yourself and ask they correct the error.
This needs to be done in writing (keeping copies and sending by recorded delivery) addressed to the Data Controller of each creditor concerned. Do not write to their general enquiries address. You can get the details of the Data Controllers from the Information Commissioner’s Office (ICO).
How to write to a lender to ask for a change in details
When you write to your debtor asking for an amendment to your details on the credit report, use a letter along these lines:
Data Controller
[creditors data controller’s address available from here: https://ico.org.uk/esdwebpages/search]
To whom it may concern,
Re: [ account number / reference/ debt details]
I entered into an Individual Voluntary Arrangement on dd/mm/yyyy which is shown on the Insolvency Register.
Having checked my [Experian / Equifax / Transunion] report I note that [there is no default date shown / the default date is shown as dd/mm/yyyy]. This is incorrect and is a breach of ICO guidelines and the Data Protection Act 1998. There should be a default date no later than the start date of my IVA.
Please correct this entry within 28 days or supply me with a written reason why you will not do so. After the 28 days have elapsed the Information Commissioner has requested I inform them if your company fails to update the records so they may take any necessary enforcement action against your company.
Yours faithfully,
What should I do if my debtor doesn’t change my details on the credit report?
If the lender will not cooperate, you can complain to the ICO, attaching copies of correspondence to and from the creditor and proof of posting. It can take some time, but the ICO should convince the creditor of the error of their ways.
How will my credit score change after completing an IVA?
Once you have made your final payment into the arrangement, your IP will conduct a final review before issuing you with your Completion Certificate / Notice of Due Completion. Until you have this you are still in the IVA and bound by its terms.
Although this is referred to as a completion ‘certificate’, it is more likely to be a simple slip of paper with the IP’s closing statement, along with the final accounts for the arrangement. But it is, nevertheless, an important slip of paper and it is advisable keep several paper copies of the certificate and accounts safely tucked away, as well as digital scans on your computer and USB.
When your IP issues the certificate, they also inform the Insolvency Service, who, in turn, report to the three credit reference agencies.
You will be removed from the Insolvency Register within three months, in the meantime your arrangement should be shown there as completed.
Also, within a few months, your IVA should be shown as completed in your credit files and defaulted accounts should be marked as satisfied / partially satisfied and show a zero balance.
Some creditors do not bother to amend the defaulted accounts, but this is not usually a cause for concern as the whole record will disappear when the 6th anniversary passes anyway.
What happens after the sixth anniversary of an IVA?
On the sixth anniversary, the IVA (if it has completed) and the associated ‘defaults’ (correctly dated) will disappear, and you will have a clean credit file.
Your credit rating should improve right away, and you can start work making it even better.
After a few months, obtain a statutory report from each credit reference agency so you can check through your details and address any persisting errors. Keep an eye open for any “Notices of Correction” mentioning the IVA, you need to request the agency to remove these.
Will my credit score return to normal after an IVA?
After completing your IVA, you should have a clean record.
Your credit rating will be “Fair to middling”, but you need to get this up to at least Good”, even “Excellent” in time.
You need to go about collecting “green ticks” on your files to demonstrate you can handle credit safely and inspire confidence in prospective lenders, landlords, utility suppliers. A well-run set of utility accounts and, or bank accounts will create a new, healthy, history.
You could, apply for one of the “adverse credit, credit builder” credit cards such as Vanquis (Provident) or Luma (Capital One). There are more entering the market all the time. The interest rates are eye watering, but limit its use to, say, petrol only, and pay back in full each month and you won’t incur interest anyway.
If your application is refused, wait a couple of months before applying elsewhere as hard searches leave a footprint on the file. The likes of Clearscore come in handy here as they can give you an indication of your chances of acceptance after a soft search (which doesn’t mark your search history).
With care your credit score should improve drastically over time and the IVA will become a distant memory.
Good luck going forward.