Credit Rating and an IVA

Credit Rating and an IVA

Your Credit Rating is negatively affected by an IVA. Getting most forms of credit is difficult during the Arrangement and for sometime afterwards.

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How does an IVA affect your Credit Rating?

The fact that you are in an IVA (Individual Voluntary Arrangement) is recorded on your Credit File. The record remains for 6 years even if you complete the Arrangement early.

During this time will find it difficult to get new credit from most high street lenders. This is because they will carry out a credit check against you which in most cases you will fail.

You may still be able to borrow from a Payday Lender. However you are strongly advised not to do this. If you have a financial emergency you must speak to your IVA Company. They may be able to give you a payment holiday.

Once your IVA is completed you can then start rebuilding your credit rating. There are various ways to do this including using a “credit repair” credit card.

What happens to your Mobile Phone during an IVA?

Your current mobile phone and other household utilities contracts will not be affected by an IVA. The accounts are not included in the Arrangement. They will continue as long as you maintain the monthly payments.

However if your mobile phone contract ends during the Arrangement it will be difficult to change to a different provider. This is because you will usually fail their credit check.

In these circustances you can simply remain out of contract with your current provider. Alternatively you could move to a different provider using their Pay as You Go option.

Generally speaking you should be able to switch to a different Electricity and Gas provider during an IVA if you want to despite your poor credit rating.

Can you get Car Finance during an IVA?

If your car is on finance you will normally be able to keep this going during an IVA. The agreement itself is not included because it is secured. You will be allowed to budget for the payments in your Living Expenses.

However applying for a new car finance agreement during an IVA is more of a problem. You will fail the credit check applied by most main stream finance companies, and so will have to use a so called sub prime lender.

These companies are more likely to lend to people with poor credit ratings. But remember, they will charge a higher rate of interest and therefore higher monthly payments than main stream lenders.

You must not take out new car finance without first agreeing it with your IVA company.

Given your Credit Rating can you Remortgage during an IVA?

If you are a home owner your mortgage is not included in your IVA. You continue to make these payments as normal. However you will normally need to consider remortgaging during the Arrangement.

If you have sufficient equity in your property you might be able to release some to settle the agreement early. If you do not do this then you will definitely be required to try and release equity in the 5th year as part of the Arrangement.

If you have sufficient equity remortgaging during an IVA is possible. However your poor credit rating means that you will have to use a specialist broker who can find an appropriate lender for you.

If you remortgage during an IVA your mortgage payments will usually increase. As such it is unlikely that you will be able to do so unless the purpose is to settle the Arrangement.