If you have an IVA or you’re considering applying for one, take a look at our guide to see how it will impact your credit file and financial health.
If you have an IVA, or you’re considering applying for one to help you recover from debt, you’ll need to spend time working on your financial health and credit score to ensure you’re in a strong position to apply for mortgages, loans or credit in the future, after your IVA.
The icount current account with prepaid Mastercard®️ is a great tool to help you manage your monthly budget and day-to-day spending, and boost your credit score. With our prepaid card, you can use it as you would a normal debit card, but you won’t be able to spend more than you load on the card. This helps you to stick to a budget and spend responsibly, which in turn can help you to rebuild your finances during an IVA. It is also a great facility to pay your monthly IVA contributions.
Find out more about IVAs and the tips and tricks you need to help you get back on your financial feet.
What is an IVA and how do they work?
If you’re in debt, an IVA could be an option for you to help you get out of debt.
An IVA is a binding agreement between you and your lenders, which will see you make an affordable repayment each month for between 60 and 72 months. After this time, all of your remaining debt will be written off and your lenders won’t be able to take any further action against you.
What debts can be included in an IVA?
An IVA can include a number of debts, such as:
- Personal loans
- Credit cards
- Council tax and utility arrears
- Income tax and NI arrears
- Outstanding bills
- Loans from family and friends
An IVA cannot include debts from sources including:
- Child support
- Student loans
- TV licenses
This is by no means a complete list, so make sure to check before applying for an IVA. Organisations such as StepChange have further information about what debts can be included in an IVA.
How can I get an IVA?
To apply for an IVA, you’ll need to first speak to an insolvency practitioner to discuss your debts and the options available to you. You’ll be able to access insolvency practitioner through local Citizens Advice services and debt charities such as Step Change. Your insolvency practitioner will help you to put together a proposal for your lenders, which 75% of them must agree to for an IVA to be put into place.
Pros and cons of an IVA as an alternative to bankruptcy
If you’re in debt, you may be considering both an IVA and bankruptcy to help you get out of debt. Both of these processes can help you to reduce or strike off your debt, but they come with different conditions. Check out the table below to find out about how an IVA and bankruptcy differ.
|How long does it remain on your credit file?||Six years||Six years|
|Do you need to be put on the Individual Insolvency Register?||Yes||Yes|
|Will it write off all of my debt?||Yes||Yes|
|Will I need to make repayments?||Yes||Generally, no|
|Is it free?||Yes||No|
|Can I rent a home during the process?||Yes||Yes|
|Can I own my own home during the process?||Yes, but you may be asked to remortgage||If you have equity in your home, you’ll probably be asked to sell it|
|Can I own a car?||Yes||No, unless it is essential|
|Will it affect my job?||Possibly||Possibly|
Does getting an IVA affect your credit rating?
Any debt solution will impact your credit rating, and this includes an IVA. By applying for an IVA, it indicates that you are not financially responsible, and you manage your money poorly.
This indicates to lenders that if they provided you with credit, you wouldn’t be able to repay it, which results in a poor credit score and will impact your future ability to get credit such as a mortgage or credit card.
An IVA will remain on your credit file for six years and after this time, your debts will be removed from your credit score. You will likely still be left with a poor credit file, which you’ll need to work to rebuild over time.
How long after finishing my IVA will I be able to apply for a mortgage?
Once your IVA is finished, you’ll be able to apply for a mortgage as normal, although getting a mortgage after an IVA means you won’t eligible for the best deals due to your lending history. By taking time to build your credit score, you’ll be able to access better lending deals.
Can apply for a mortgage if I am currently in an IVA?
Although there is no reason why you can’t apply for a mortgage whilst in an IVA, it’s likely you won’t be given any offers due to your IVA and lending history. Take a look at the IVA guide from the Money Advice Service for more information.
IVA Mortgage Lenders
If you do want to apply for a mortgage during your IVA, there are some specialist lenders who will consider your application and are more likely to lend to you. You should speak to specialist bad credit mortgage brokers who will help you to find the best available deal, but be prepared for lenders to ask you to provide a 50% deposit.
Once my IVA is finished, will I be accepted for secured and unsecured loans?
Once your IVA is completed, you may be wondering ‘Can I get a loan with an IVA?’. After an IVA, you’ll be allowed to apply for credit without any restrictions, or needing to ask for permission from your insolvency practitioner.
Despite this, your poor credit history will mean that lenders are less likely to lend to you, and you may struggle to find credit.
There are a number of lenders and credit card providers that specialise in lending to people with poor credit or previous IVA’s. These lenders are likely to offer you a low credit limit and very high-interest rates, so it’s worth spending time considering if you really need to access credit.
For more information, take a look at the Money Advice Service’s borrowing guide to help you make an informed decision about your money.
How to rebuild your credit after an IVA using our prepaid card (with CreditBuilder™)
If you’ve just completed your IVA, you’ll want to start rebuilding your financial health. The icount prepaid Mastercard®️ has a number of tools that can help you to get back on your feet.
With your icount prepaid Mastercard®️, you’ll have access to our CreditBuilder™ tool. With this tool, we will report your monthly payments to credit agencies, and these one-time payments will positively contribute to your credit file.
The CreditBuilder™ tool comes free with our current account and doesn’t require any credit checks so you’re guaranteed to be accepted, subject to terms.
Budgeting and day-to-day spending
To ensure you don’t dip into costly overdrafts or need to borrow more money, a monthly budget is key.
The icount prepaid Mastercard®️ is a great tool to help you stick to your weekly budget. As you can’t spend more than is loaded in the card, you’ll be able to load a set amount this week and not spend any more than that.
With online account management and text updates, you can stay on top of what you’re spending and manage your money to make sure you don’t need to dip into overdrafts or loans at the end of the month.
Responsibly managing your money in this way will help to boost your financial health and credit score.
5 more ways to improve credit after an IVA
Once your IVA is finished, you’ll need to spend some time rebuilding your credit score to be able to take advantage of credit and mortgages in the future.
Check your credit record
After an IVA, it’s worth accessing your credit record to ensure that your IVA has been properly recorded. The three main credit record companies: Experian, Equifax and Callcredit will provide you with a copy of your statutory credit report for a small fee. Check to make sure that the dates and details of your IVA are correct and ask for a correction if any details are wrong. This will make sure that your credit details are correct and can help to boost your credit file if details are corrected.
Put aside some money each month
If you’ve struggled to save whilst making IVA repayments, it’s time to start putting a little away at the end of each month. Even small, regular payments will ensure that you are able to meet the costs for unexpected bills or payments, and will help to rebuild your financial health.
Use credit wisely
It’s tempting to apply for credit in hopes of rebuilding your credit score, but you need to be careful about using credit after an IVA. It’s key not to get into more debt or spend more than you can repay.
Consider making one purchase a month on a credit card and paying it off in full, and on time each month. This will help to prove you’re a responsible borrower and will help to increase your credit score over time.
Wait it out
Your IVA remains on your credit file for six years from the date it’s started, and it will have a large impact on your financial health for this time. After this time, you’re more likely to be approved for credit, so it’s best to wait until your IVA is no longer on your credit file before making applications.
Make a budget – and stick to it
Following an IVA you need to make sure that you don’t fall back into poor spending and budgeting habits. Spend some time each month making a budget, and ensure you stick to it.
If you often find yourself overspending, an icount prepaid Mastercard®️ could be a great option for you. Simply load on a set amount each week, and as you’re not able to spend more than what is loaded onto your card, you’ll find it easier to stick to your budget.