Whether it’s already occurred or it’s just about to, the day you complete your IVA is a joyous one. Aside from being extremely proud of yourself, it’s time to start thinking about managing your money again, now that it’s all your own. And no one could possibly blame you!
However, the likelihood is that your IVA will have some long lasting effects over your credit, which could take some time and effort to remove. There may be a time in the future when you need credit to realise your plans, such as to buy a new home or car. So, if you don’t want to be restricted financially in the years after your IVA is completed, you need to take measures to improve your credit score.
There may be a time in the future when you need credit to realise your plans, such as to buy a new home or car. So, if you don’t want to be restricted financially in the years after your IVA is completed, you need to take measures to improve your credit score.
The first thing that will happen after you make your last payment is that you’ll get an official signed IVA completion certificate. This is the document that proves that your IVA has finished – congratulations to you!
Next, the records held by the insolvency service concerning your financial status will be updated to reflect your new debt free status.
Once the paperwork is all completed, you should get yourself a copy of your credit file, which is easier than ever in this digital, online world we live in. There are four credit reference agencies (CRAs). Experian, Equifax, Transunion and Crediva. You can check all 4 using Check My File. Each one offers online access to your credit file, completely free of charge.
If you want to obtain a complete image of your credit status, you will need to get one of these copies from each of the four agencies, as creditors aren’t always in the habit of registering your debt with all of them.
When you try and gain an understanding of what’s actually on your credit file, it can feel like a mixture of science and magic. We promise, once you know what you’re doing, it’s pretty easy to grasp.
What muddies the waters a little is the fact that each agency has its own unique system for credit scores (e.g. Experian scores range between 0 and 999). Don’t get too hung up on these figures, however, as all you really need to understand is that when you manage your personal credit well, your score will rise.
Conversely, if you don’t manage it well, your score will drop and the lower it goes, the harder it will be to get the best finance deals or even get credit at all. When you get credit, the details of the arrangement will be held on your credit file. Information like the date you applied, who you borrowed from and your payment history will all be held there. If you settle your bills using credit, these utility accounts will also show up on your file. The following will be displayed:
When you first began your IVA, it marked the beginning of the six year period that it stays on your credit file. So, should your IVA have been for a duration of 5 years, it will still remain for a year after it has finished. Even if you complete your IVA early it will still remain on your file for 6 years from the start date. Once your IVA drops off your file you will see a large improvement in your score. But only if any defaults drop off along with the IVA, for this to happen you need to ensure your default dates on your credit files are correct. They should dated no later than the IVA start date.
Another detail that needs to be checked that none of your default dates are shown to be later than the date your IVA started. If any of your listed defaults are displayed as being after the date of your IVA registration, it could cause you problems obtaining credit longer than it should.
We’d seriously recommend checking with all four credit reference agencies to make sure everything’s as it should be and reporting any discrepancies directly to the appropriate creditor. Telling the credit agencies is not going to achieve much, as they’re going just going to pass a message to the same people.
The letter can be wording like the bellow;
re: [account/reference xxxxxxxxxxxxxxx] I started an Individual Voluntary Arrangement (IVA) on dd/mm/yyyy.
You can confirm this by checking the Insolvency Register at Insolvencydirect
I am writing to ask you to correct my credit file for [details of your debt with the creditor, including the account number or reference number].
This debt is included in my IVA. At the moment [there is no default date shown / the default date is shown as dd/mm/yyyy].
This is incorrect and a breach of the Information Commissioners Office guidelines and the Data Protection Act 1998.
Your credit report is a constantly evolving thing, as it is a snapshot of a six year period in your financial history. The good thing about this fact is that it can be healed. Once you hit the six year point from when you took out your IVA, you should have something of a clean slate to work with.
That said, you almost certainly won’t have the best credit score when you exit your IVA. As previously mentioned, what you’ll need to do is show the credit agencies that you are able to manage your money well. If you can do that, you’ll be rewarded with a better credit score.
In order to do this, you more than likely have to take out new loans or credit to help build up your score. If this accurately describes you, we have 4 tips you should follow:
It might seem like the last thing you want to do after the money issues you’ve had, but one of the most effective ways to assist your financial recovery is by operating a low limit credit card making sure to only use 10-15% of the available credit and pay the balance in full each month.
A lot of people find that having a Vanquis Credit Card (a financial product designed to help you rebuild your score) can accelerate the upward trajectory of your credit status.
As mentioned it’s best to only use 10-15% of your available credit each month so that it shows that you can manage your credit correctly and consistently which will help your score improve. It must be said that applying for a credit card will initially impact your credit score, but as you pay it off each month, this will gradually improve.
If the road that took you to needing an IVA has left you with a bad taste in your mouth when it comes to borrowing money, there are other ways to improve your score without taking out credit. Companies like Loqbox can help you build your credit score back up, whilst putting money aside for a rainy day.
You can save between £20 and £500 each month, which is put into a virtual savings pot that’s worth 12x what’s in it. Rather than paying for your Loqbox, you are given finance to pay for it on an interest free basis, the payments for which are equal the amount you agree to put into it each month.
Each one of these payments shows up with all 3 credit referencing agencies, illustrating to lenders everywhere that you’re able to manage credit. By the end of the 12 month period, you will have completely paid for your Loqbox, which can then be opened, making all of your savings available to you.
However, nothing is set in stone and if your circumstances change, your Loqbox can be opened whenever you want it to be, with all of your money being returned to you without any penalties or fees. This is a much better option than missing a payment, as doing so will have a negative impact on your credit score.
We have no affiliation with Loqbox, nor do we receive any commissions for recommending them, but we feel that their service is a good one to those trying to boost their credit status.
Take a look at our guide to getting a mortgage after an IVA