Can I get credit during an IVA?
This is a very common question we are asked. People are that used to living on credit cards, payday loans and hire purchases that they are scared of the prospect of not having them as an available option.
So, what’s the deal?
An IVA can lower your monthly outgoings considerably, whilst giving you allowances for food, entertainment, fuel, childcare, pocket money and holidays. This new found freedom will eliminate the need for credit completely, you just need to stick to your budget and concentrate on enjoying life.
Can I get credit after an IVA?
Generally speaking, yes. You may have been experiencing maxed out credit cards, missed payments and payment plans before your IVA. Although it won’t always be straightforward to get credit straight away, the end of your IVA marks an opportunity for you to rebuild your credit file and therefore you will be allowed some credit. Try to stay clear of any credit which is unaffordable, some lenders are more responsible than others so be sure to pick the right ones.
How long after an IVA can I get credit?
There is no one fits all answer for this because it can depend on your personal circumstances such as salary and income and expenditure. There is nothing stopping you receiving credit after your individual voluntary arrangement, although it may not be on the favourable terms you see advertised on the TV.
How long does an IVA stay on my credit file/credit report after completion?
IVA’s stay on credit files for 72 months in total (6 years). This is based on them remaining on your credit file for 12 months after the date that it first started.
Can I get car finance after an IVA?
Similar to any credit, it depends on the lender. Some people have had normal experiences of hire purchase but may struggle to get a leased car. It depends on a number of factors such as your affordability and the value of the car, there may be specialist lenders who can help you to get a car on finance without such strict credit checks.
Can I get a mortgage/remortgage after an IVA?
Getting a new mortgage after an IVA is possible, although you may not be eligible for 100% of promotional offers. Most of these offers are usually only available to customers who have an impeccable credit rating and a very high deposit to contribute, this usually doesn’t apply to people who qualify for an IVA.
A remortgage can be easier as you will usually have equity in your property and a trading history with your lender, which will help in the application stage.
First celebrate (but don’t go mad!)
Completing your IVA is a huge achievement, and one that deserves a celebration. That first time that salary goes into your bank account and it’s all yours is a wonderful feeling. Take some time and some of that money and do something you’ve wanted to do for a while but couldn’t because of the IVA. Some people go away for the weekend, or get expensive tickets for a show they’ve wanted to see. Other people buy a piece of jewellery or even a new winter coat if they’ve put it off for a few years. Whatever you do, make sure to mark the occasion in some way.
Stick to the budget
For the last five years you’ve learnt how to live within your means, to live according to a budget. Your new financial knowledge has been hard won and will help you build a solid financial foundation for your future. While the temptation to throw caution to wind is very strong now you are debt-free, it could land you back in debt before you realise it.
In the months that follow your IVA discharge, stick to your budget as much as possible for safety.
Check your credit record
Your IVA will be listed on your credit record for the duration that you have it, however once you make your last payment your creditors should put a notice on your record to say the debt is re-paid and when it was.
It is not always done correctly so you must check the records that credit agencies Experian and Equifax hold to see what has been recorded. Sometimes creditors put in dates well beyond your finish date or even without a date at all. If this has happened you should write a letter requesting the dates be corrected.
Wait a few months after your last payment to allow the paperwork to catch up and then check and correct if necessary.
You will not have been allowed to save for any reason during your IVA, but there’s nothing to stop you now putting aside some money. It’s always a good idea to have some cash in reserve, if only to ensure you don’t have to resort to credit to pay for something unexpected, like a large repair bill.
Some people aim to have enough to cope with an emergency, such as a boiler breakdown or large car repair bill, others set a goal to save for a house deposit if they want to own their own homes. Whatever the reason, start saving as soon as your last IVA payment is taken.
Start repairing your credit record
Your IVA will last on your credit record for six years from the time of your last payment, and at times will prevent you from doing things you want to. The most important thing you can do is find ways to help repair your credit record in the most low risk way possible. Do not go out and obtain payday loans and pay them back to show you are financially responsible – that will work against you on your record as payday loans are a black mark on your credit record.
Instead find small ways to make consistent monthly payments and demonstrate your financial responsibility. There are many other ways of taking small but consistent steps to repair your credit. For example, if you can get a credit or budget card even with a very low limit, use it to pay one small bill or living expense every month, such as a week’s shopping. Pay it off immediately when it becomes due. This way you build up your credit rating with many small but successful payments.
The key to repairing your credit rating is to do it slowly, consistently and as low a risk as possible.
If you do not have an IVA but you would like to apply for one, click apply now below.