An Individual Voluntary Arrangement (IVA) is a facility that allows people to put past financial issues behind them and start rebuilding their lives. Whilst an IVA does offer a way to write off a large portion of your debt and let you start again, the task of improving your credit score is going to take a bit of effort on your part.
Don’t worry though, the work required is not going to take up much of your time, but it does have to be done the right way – something we look at in more detail now.
From the date your IVA begins, it will usually stay on your credit file for a minimum of 6 years and during this time, your job is to keep your nose clean and live within your means. Having to stick to a budget is certainly not a bad thing, as it’s a really good habit to develop.
Once you’ve cleared your outstanding debts and you are in possession of your IVA completion certificate, you’ll have a clean slate, but almost certainly a low credit score.
Step 1 on your journey to good credit is ensuring that all the three major credit reference agencies (Equifax, Experian and CallCredit) have the right information about you regarding your default dates. If any of your creditors have registered default dates after the date your IVA started, then this needs correcting. The best and quickest way to do so is to inform the creditor in question in writing, as informing them by phone will just lead to a request to send in a letter.
Step 2 is to start using credit again, but in a much more controlled and low level way. A Vanquis Card is something that many people in this position use to rebuild their credit score. It’s recommended you use no more than 10-15% of the total available balance and that you pay it off in full every month to illustrate your ability to manage credit responsibly.
If you do both the above steps you’ll find that on the 6 year mark everything negative will drop off your credit file and your score will shoot up! View our guide to cleaning up your credit file.
The simple answer is yes, you can. You might not be able to get a mortgage by going via the high street route, but there are plenty of opportunities for application success when talking to a specialist broker. Brokers like the kind we recommend are able to access deals and rates designed for those who are recovering from money problems and arrangements like IVAs, with a particular focus on judging applicants on their overall financial status rather than traditional, immutable lending criteria.
Some of these special deals can sometimes be with mainstream lenders, it’s just that you’ll need to go through a specialist broker to gain access to them.
The best advice we can give is to manage your finances in a stable and considered way, use a small amount of credit in the way mentioned above and you should see a slow but meaningful increase in your credit score. The more evidence you supply that you’re an upstanding citizen that is sensible in the way they use credit, the better you’re going to look in the eyes of lenders.
Keep browsing through our website and you can find out more about obtaining a mortgage after an IVA, cleaning up your credit after an IVA. Alternatively, you can talk to one of our recommended brokers about the special deals that are available to you.