Can I Get Credit With an IVA?

Individual Voluntary Agreements (IVAs) can be an ideal option to help you manage unaffordable debts. If you’re considering an IVA or are already in an active IVA, one of the frequently asked questions is about whether you will still be able to get credit while in an IVA.

An IVA can help you get your finances back on track and repay your debts. You may even be able to write off any outstanding unsecured debts after the IVA period has successfully completed, as many of our customers have.

If you are considering an IVA then it is worth bearing in mind that the IVA will be registered on your credit file and will affect your credit score, but in the long-term it can help you to repay or write off your unsecured debts, so you can start rebuilding your credit rating.

We will go into more detail regarding the use of credit and IVAs in this article. You can also fill out our application form using the link below, our experienced and friendly advisors can help with a debt solution that’s personal to you and address any questions you may have about how an IVA would affect your ability to obtain credit.

Can you get credit with an IVA?

It is not recommended that you obtain further credit whilst in an IVA as any credit more than £500 will be a breach of the terms of your IVA and could place it at risk of failure. If the IVA was to fail it would lead to the money you owed to creditors being repayable by you without the protection of the IVA.

In an IVA your monthly expenditure is accounted for, allowing you to pay for day to day essential items before the payment to the IVA is made.

If, during the IVA, an unexpected emergency item of expenditure comes to light, it is likely that the Insolvency Practitioner can assist, rather than turning to the use of credit. You should contact them so they can discuss your circumstances and go through the options with you.

How does an IVA affect your credit score?

When evaluating whether to provide credit or a financial product, lenders are likely to check your credit report.

An IVA appears on your credit file at the date of approval and will remain there usually for six years. This means, at least in the short term, and after your IVA completes your credit score will be adversely affected by the IVA.

However, it’s also important to note that if you’ve been struggling with debt and payments to your creditors, this is already likely to be recorded on your credit report and may have already affected your ability to access additional credit products, such as loans. This means that if you are thinking about an IVA you may want to consider what will be the best solution for you in the long-term and how you can rebuild your credit in the future. For many people, an IVA allows them to do this.

Can I get credit during an IVA?

It is not recommended that additional credit is obtained during an IVA as this may lead to the IVA failing.

Some people, who are homeowners, may need to seek to remortgage their property during an IVA. There are specialist lenders who can help with this and the supervisor of your IVA will assist you with this process.

Would you get credit without an IVA?

Although an IVA restricts you from obtaining further credit, it’s important to think about whether you would have been able to obtain credit anyway.

When applying for a loan, lenders would review your credit file and if you were struggling with repayments it could be that defaults have already been registered on your credit file. An IVA demonstrates although you’ve had problems repaying creditors before you’re doing something about your debts.

Some lenders may view a completed IVA more favourably than a credit report which contains several financial products which have been defaulted on and you’re struggling to pay.

Therefore, an IVA may put you in a better financial position for the future.

Can I get credit after an IVA?

Once your IVA successfully completes, you will receive a certificate of completion. Your details will usually be removed from the Insolvency Register within three months and credit reference agencies should automatically update your credit file to show that the IVA has completed. The IVA will remain on your credit file for a further 12 months, if your IVA was over a five year term. It is always worth checking your file to make sure this has been done.

You can also ask for a note to be added to your file explaining why you got into financial difficulty and had to apply for an IVA, such as redundancy or illness.

You can start looking into rebuilding your credit score. It may still be difficult to get good deals on credit initially, but keeping up repayments and remaining within credit limits should positively affect your score.

Therefore, after the IVA ends, there shouldn’t be anything stopping you from applying for credit.

Rebuilding credit after IVA

Once your IVA has been completed, you should be proud of your achievement as you’ve taken positive action to resolve your debts. There are several ways to now build your credit rating. For example:

• In future, try to only take out small loans;
• Pay your credit back in full and on time;
• Ideally never use more than 30% of your credit utilisation ratio.

Over time, your credit rating should increase and you’ll be well on your way to better financial products. You might even be able to get a mortgage after an IVA.