How long will an IVA stay on my credit history?

23 March2010

An IVA (Individual Voluntary Arrangement) could be the right debt solution for you if you`re struggling with debts that you can`t see yourself being able to repay. By enabling you to repay only what you can afford, an IVA can make your debts manageable again and give you a clear, realistic way of becoming debt-free.

But as with any debt solution, there are a few things you`ll need to consider. For example, an IVA will have a big impact on your credit rating - you`ll have to wait six years before it comes off your credit report.

Quick guide to IVAs

An IVA is a legally-binding agreement between you and your lenders. It works by allowing you to repay as much as you can afford towards your debts each month, usually for five years. At the end of this period - assuming you fulfil your side of the agreement - what`s left of your debt will be written off by your lenders, and you`ll be legally debt-free (in terms of unsecured debt; an IVA can`t write off secured debts, like a mortgage).

Your monthly payments to your IVA will be based on how much you can afford after your other essential costs (e.g. mortgage/rent, groceries, bills) have been covered.

But remember: IVAs are designed to deal with non-priority debts, such as unsecured loans, credit cards and overdrafts. As such, an IVA would only be appropriate if you`re struggling with this type of debt.

However, although your IVA won`t directly cover priority debts, such as your mortgage or secured loans, it will help to ensure you have enough money put aside each month for these costs.

How does an IVA affect my credit rating?

First of all, you`ll have serious restrictions on your ability to borrow while your IVA is in progress: you won`t be allowed to take on any more debt without your IP`s permission.

Plus, an IVA is a form of insolvency, and will have a significant impact on your credit rating. A record of your IVA will remain on your credit history for six years after it begins. This should mean you`ll have a clean credit history a year after your IVA has finished (assuming it`s a five-year IVA).

For more information on IVAs and how yours will affect you, click here or call our expert debt advisers on 0800 195 2911.

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