The effect of an IVA on your credit rating
An Individual Voluntary Arrangement (IVA) is a legal agreement between yourself and your lenders to pay back your debt in smaller sums over an extended period of time. You will require the services of an Insolvency Practitioner in order to set an IVA up.
An IVA can be a good measure to take to give yourself more time to pay your debt in an affordable manner, though it comes with a number of inherent risks that it is important you are aware of.
This page tells you about how an IVA may impact your credit rating and access to future credit.
The following guide will outline to you the potential affects that an IVA could have on your credit rating, so you are fully aware of the consequences of setting one up.
Obtaining new credit
If you have set up an IVA, then this will negatively impact your chances of attaining new credit in the future. However, you might be given access to credit if it is for family related purposes or for living essentials and services.
If you are self employed or a company owner, you might be able to access credit to purchase business itinerary. However, due to a reference of your IVA being placed on your credit history, this finance might be given to you at a higher interest rate than usual. It is important to keep in mind that taking out further credit at a higher rate could escalate your financial difficulties and create new problems and fresh debt not managed by your IVA.
If you desire to obtain over £500 in credit whilst using an IVA, you will need to acquire written permission from your presiding insolvency practitioner, unless you require the finance to pay for your water, gas or electricity bills.
How will creditors know about the IVA
Information about your IVA will be placed onto a public register entitled the Individual Insolvency Register and will remain there for the duration of your agreement. This reference will impact your ability to access credit whilst on the IVA, and your creditors will likely look at the register before making a decision whether to grant you access to further finance.
Information about your usage of an IVA will also be present on your credit reference file, which is held by the three major credit reference agencies.