An IVA is designed to help you deal with debts you can no longer afford and provide a structured route towards becoming debt-free. Once your debts are under control, you can focus on completing the arrangement and rebuilding your finances.
An IVA is therefore not about improving your credit rating immediately. It is about getting out of a cycle of unaffordable debt and giving yourself a chance to build a more secure financial future.
Will an IVA affect my credit rating?
Yes.
An IVA is recorded on your credit file and is likely to make it considerably harder to obtain credit while it remains on your record.
Lenders use information on your credit report, alongside other information, when deciding whether to offer you credit. An IVA tells them that you have previously experienced financial difficulty and entered into a formal arrangement with your creditors.
As a result, you may find it difficult to:
- Obtain credit cards
- Take out personal loans
- Obtain finance at competitive interest rates
- Get a mortgage
- Increase existing borrowing
- Access some financial products
The impact will depend on the lender and your individual circumstances.
It is also worth remembering that your credit score is not the same thing as your credit report. Credit reference agencies calculate scores differently, and lenders use their own criteria when assessing applications.
How long does an IVA stay on your credit file?
An IVA normally remains on your credit file for six years from the date the IVA starts.
This is important because an IVA will usually last around five or six years, depending on the arrangement.
For example, if your IVA lasts five years, there could potentially be around one year between completing the IVA and the IVA record reaching the six-year point.
The GOV.UK IVA Protocol confirms that an IVA will appear on your credit file for six years from the date it starts.
The six-year period does not restart when you complete your IVA.
What happens to your credit rating during an IVA?
During your IVA, you should expect your access to credit to be restricted.
Your IVA will be visible to lenders checking your credit file, and you may find that applications for borrowing are declined or that any credit available to you comes with a higher interest rate.
There are also restrictions on obtaining additional credit while an IVA is in place. Under the standard IVA terms, you generally need your Insolvency Practitioner's written approval before obtaining credit above the specified limit.
The purpose of these restrictions is not to punish you. They are intended to help prevent you from taking on additional unaffordable debt while you are completing your IVA.
In many ways, this can be an important part of the journey.
Instead of continually borrowing to cover existing debts, your IVA gives you a period in which you can concentrate on living within an affordable budget and becoming financially stable.
Can you get credit during an IVA?
You may be able to obtain some credit during an IVA, but there are restrictions and you should not take on new borrowing without first checking the terms of your arrangement.
Your Insolvency Practitioner can explain what you are permitted to do.
Even where borrowing is technically available, taking on additional debt during an IVA can make your financial situation more difficult.
An IVA works by creating an affordable and sustainable repayment plan. Taking on new borrowing can undermine that plan.
The positive side of an IVA
It is important to look at the whole financial journey, rather than focusing only on your credit rating.
If you're considering an IVA, you may already be struggling with:
- Missed payments
- Credit cards that are close to their limits
- Increasing loan balances
- Overdrafts
- Debt collection letters
- Arrears
- Interest and charges
- Borrowing more money to repay existing debts
- Constant worry about how to make your next payment
In this situation, your credit rating may already be suffering because of missed or late payments and other financial difficulties.
An IVA can provide a structured way of dealing with those debts.
Once your IVA is approved, the creditors included in the arrangement stop pursuing you for payment of those debts, subject to the terms of the IVA. You then make the agreed affordable payments into the arrangement.
The GOV.UK key facts for IVAs confirm that once all agreed payments have been made, you receive a certificate of completion and will no longer owe the debts included in the IVA.
That can be a significant turning point.
The goal isn't the credit score
It can be tempting to think about an IVA simply in terms of how many points your credit score might lose.
But if you're struggling with unaffordable debt, the bigger question is:
Where do you want your finances to be in five or six years' time?
Continuing to struggle with debt and relying on further borrowing may leave you in the same situation years down the line.
An IVA provides a structured route towards dealing with your qualifying debts.
By completing the arrangement, you can reach a point where those debts have been dealt with and you can start concentrating on rebuilding your financial future.
What happens to your credit rating when you complete your IVA?
Completing your IVA is an important financial milestone.
Once you have made all the payments required by your arrangement, your Insolvency Practitioner will issue a certificate of completion.
Your IVA does not disappear from your credit file immediately when you complete it.
If the IVA has been completed before the six-year point, it should remain on your credit file until the six years from the start of the IVA have passed.
However, the record can be updated to show that the IVA has been completed.
Experian explains that an IVA remains on your credit report for six years from the date it was approved, but that the record will be marked as complete when the arrangement has been successfully finished.
This is an important distinction.
Completion does not mean your credit history instantly becomes perfect. It means you've successfully completed the formal debt solution and can move forward.
What happens when the IVA is removed from your credit file?
After six years from the date your IVA started, the IVA should no longer appear on your credit file.
At this point, lenders looking at your credit report should no longer see the IVA itself.
However, you should remember that your credit history contains other information too.
Individual debts included in the IVA may have their own entries, and these can have their own reporting periods.
It is therefore important to check your credit reports after the IVA and make sure the information being reported is accurate.
If something is incorrect, you can contact the relevant credit reference agency and ask for it to be investigated.
How can you rebuild your credit after an IVA?
Once your IVA is completed, you can begin rebuilding your credit profile.
There is no need to rush.
In fact, one of the most positive things you can take from completing an IVA is the financial habits you have developed during the arrangement.
You can start by:
Keep your bills up to date
Pay your rent, mortgage, utilities, Council Tax and other regular commitments on time.
A consistent payment history can help demonstrate that your finances are now under control.
Keep your borrowing affordable
You don't need to take out lots of credit simply to improve your credit score.
If you do eventually use credit, make sure you can comfortably afford the repayments.
The aim is to avoid returning to the cycle of borrowing that caused financial difficulties in the first place.
Check your credit reports
Check your credit reports with the main credit reference agencies and make sure the information is accurate.
If you find an error, contact the credit reference agency and the organisation that supplied the information.
MoneyHelper recommends checking your credit report and correcting inaccurate information.
Keep your finances organised
The budgeting skills you develop during an IVA can continue to benefit you after it ends.
Knowing exactly what comes into your household and what goes out each month can make it much easier to avoid future financial problems.
Build an emergency fund
Once your IVA has finished and your circumstances allow it, building some savings can provide an important financial safety net.
Even a relatively small emergency fund can reduce the need to rely on credit when an unexpected expense arises.
Give your credit history time
There is no instant fix for a damaged credit history.
Your credit profile is rebuilt through consistent financial behaviour over time.
Experian notes that as an IVA ages, your credit position can gradually improve, particularly as more recent financial information becomes more important to lenders.
The journey from problem debt to financial independence
An IVA can feel like a major setback when you first consider it.
It is understandable to worry about your credit rating, your ability to borrow and what other people might think.
But an IVA can also represent the point where you stop trying to manage an impossible level of debt and start dealing with it properly.
The journey can look something like this:
Problem debt → IVA approved → affordable payments → debts brought under control → IVA completed → credit file updated → IVA eventually removed → rebuilding your financial future
During the IVA, your focus is on completing the arrangement and maintaining financial stability.
After completion, your focus can gradually move towards rebuilding.
That might mean saving for the future, maintaining a clean payment history, improving your financial habits and eventually accessing financial products on more favourable terms.
Your credit rating is only one part of your financial health.
Being free from unaffordable debt can be far more important.
Can your credit rating improve before the IVA is removed?
Your credit rating can change during the six-year period, although the IVA itself will continue to be recorded until the end of that period.
The existence of an IVA will continue to make obtaining credit more difficult, but lenders consider more than a single number.
As the IVA gets older, your more recent financial behaviour can become increasingly relevant.
Once you have completed the arrangement, maintaining your finances responsibly can help demonstrate that your circumstances have changed.
However, there is no guaranteed timetable for your credit score to improve, and different lenders use different criteria.
Can I get a mortgage after an IVA?
An IVA can make obtaining a mortgage more difficult, particularly while it remains on your credit file.
However, having had an IVA does not mean that you can never get a mortgage.
Once the IVA has been completed and the record has eventually disappeared from your credit file, your options may improve.
Mortgage lenders will still consider your income, affordability, deposit, existing commitments and overall credit history.
If you are planning to buy a home after an IVA, building savings and maintaining a strong payment history can put you in a better position.
Is an IVA right for me?
The impact on your credit rating is something you should consider carefully before entering an IVA.
However, it should not be considered in isolation.
If you are already struggling with unaffordable debt, continuing to borrow or missing payments can also damage your credit history.
An IVA may provide a structured route out of that situation if you meet the requirements and it is appropriate for your circumstances.
An IVA is not suitable for everyone, and other solutions such as a Debt Management Plan, Debt Relief Order or bankruptcy may need to be considered.
You should compare your options and understand the consequences before making a decision.
Get debt help online or call our FREE Helpline 0800 3688 286 (freephone, inc. all mobiles) for a confidential conversation.
Your credit rating is not your financial future
An IVA will have a negative impact on your credit rating.
There is no point pretending otherwise.
But a poor credit rating is not permanent, and neither is an IVA.
An IVA can provide a defined period in which you deal with your qualifying debts, develop better financial habits and work towards becoming debt-free.
Once you complete the arrangement, you can start looking forward rather than constantly worrying about the debts behind you.
The credit rebuilding process takes time, but every year that passes gives you another opportunity to demonstrate that your financial circumstances have changed.
Completing an IVA isn't the end of your financial journey — it can be the beginning of a much more stable one.
IVA and credit rating: frequently asked questions
Get debt help online or call our FREE Helpline 0800 3688 286 (freephone, inc. all mobiles) for a confidential conversation.
Sources and Further Reading
GOV.UK – Key Facts: Protocol Individual Voluntary Arrangements
Experian – Individual Voluntary Arrangements (IVAs)
MoneyHelper – How to improve your credit score
