Credit Score Basics > How does an IVA affect credit score?

How does an IVA affect credit score?

Wollit Team4 minute read · Updated 30th June 2024

Once you enter an IVA (short for individual voluntary arrangement) to clear your debts, it will go on your credit report and bring down your credit score. How much exactly will depend on your circumstances, but expect your score to fall into the "Very Poor" band immediately after entering an IVA.

This is because an IVA shows that you've had trouble repaying debt in the past. The very act of entering an IVA means admitting that you are struggling to repay debts – hence the "voluntary" part.

Unfortunately, despite this being a positive step in paying back what you owe and getting yourself back in shape financially, future lenders may still view you as a high-risk borrower.

Can I still get loans while I have an IVA?

Besides lowering your credit score, an IVA will impact your ability to get credit in other ways, too:

Your IVA will also be listed on a public register called the Individual Insolvency Register, where lenders (and anyone, really) can view your IVA details for free.
As a result, you'll have a more challenging time getting approved for credit cards and loans – and even for things like getting a new mobile phone contract.
If you do get approved, you'll be asked to pay a higher interest rate. In the UK, APRs for "bad credit loans" range from 30% to 600% per year.
If you want to borrow more than £500, you must first get written permission from your insolvency practitioner – the professional managing your IVA.

In other words, your chances of getting a loan during an IVA are slim, and even if you get approved, it will be on terms that you might not like.

But there is a silver lining: as your IVA gets older, it will carry less weight. Over time, you might even see your credit score improve (especially if you've taken steps towards it), as well as your chances of getting approved for loans.

How long will an IVA stay on my credit report?

Your IVA will be visible on your credit report for six years. It will also show up in the Individual Insolvency Register during this time. And if your IVA covers multiple debts, you might see each of them listed separately on your credit report.

This six-year term is set in stone.

If your IVA was only five years long, it will still appear on your credit record for another 12 months after that. Even if you finish the IVA early, for example, if you manage to pay back the debt early because you get an inheritance, the IVA will still appear on the file.

The only difference is that in these cases, it will show up as "complete." Of course, a completed IVA will be better than an ongoing one, but it will have a negative impact on your credit rating nonetheless.

However, once the six-year term is over, the IVA will be removed from your credit report.

That doesn’t mean it will be gone completely. Some lenders might ask if you've ever been in an IVA – it's best to be honest and not lie on the application. Old, completed IVAs carry less weight than newer, ongoing ones anyway.

How is an IVA removed from my credit report?

Once an IVA is completed, it will be removed without you having to do anything. Usually, the process can take a few months.

First, your insolvency practitioner will inform the Insolvency Service. The service will then update the Insolvency Register. Then, they will notify the credit reference agencies. Only then will the agencies mark the IVA as "completed" in your credit report.

However, you can speed up the process.

Once you make the final payment, you will be issued a Final Report. This report details what happened to all the money you paid into the IVA, including how much the creditors got back.

The final report also contains a Certificate of Completion, which is your proof that the IVA was completed successfully and that you no longer have any legal obligations related to it.

To make sure the IVA is removed faster from your credit report, you should send a copy of your Certificate of Completion to the credit reference agencies: Experian, Equifax, and TransUnion. This can take a few weeks, but it's still faster than waiting for them to do it first.

Once you have completed all of this, you should request a copy of your credit report to ensure that the IVA is properly marked as completed.

How can I reduce the impact of an IVA to my credit score?

Three things you can do to reduce the negative impact of an IVA are: pay off the debt early, add an explanatory note to your credit report, and improve your credit score.

Adding an explanatory note is easy: contact the credit reference agencies (Experian, Equifax, and TransUnion), and ask them to add a note explaining why you got into debt and had to enter an IVA.

Lenders will be more likely to understand if they know you did it because you were sick or lost your job.

Will my IVA damage my partner's credit score?

Your IVA should have no impact on your partner's credit score. The only exception is if you have a "financial association" with them.

This can be anything from a joint bank account or joint mortgage to any financial product where both your names are listed. Being named alongside on the tenancy agreement or a utility bill shouldn’t be an issue, though.

To stop your IVA damaging your partner's credit rating, you should do these first:

Close all joint accounts.
Remove each other as additional cardholders for any credit cards.
Pay off any joint debt.
Once this is all done, contact the credit reference agencies and request a notice of disassociation.

A "Notice of Disassociation" is normally used if you are getting separated or divorced and no longer want any financial links.

However, you can apply for one even if you don’t intend to break up with your partner and just want to ensure that your IVA doesn’t damage their credit rating. Again, you must ensure these financial links are severed first.

How can I repair my credit score after an IVA?

Having an IVA removed from your credit report doesn't mean your credit score will bounce back. In many ways, you'll be restarting your credit score from scratch.

Here are the best and safest things to do immediately after your IVA is completed (and even before):

Register to vote. It takes five minutes and could add up to 50 points to your score.
Apply for a credit-building card, but only use it for essential daily purchases (never more than 30% of the credit limit), and make sure you make all repayments in full each month.
Download a credit-building app like Wollit. Wollit reports your monthly subscription as a loan repayment to all three credit reference agencies. It also reports your rent payments, helping you slowly rebuild your credit history.