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An individual voluntary arrangement (IVA) will affect your credit rating because it will be recorded on your credit file. This form of insolvency is a legally binding agreement between you and your creditors that helps you pay off your debts at an affordable rate.
IVAs are available in England, Wales and Northern Ireland. In Scotland, a protected trust deed is a similar solution, but has different benefits, risks and fees associated with it.
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An IVA should be considered with care because of the possible consequences for your personal, professional and financial life. That's why it's important to get free and impartial advice before going ahead with an IVA, so you fully understand how you may be affected.
If your IVA fails, creditors may request that your IVA supervisor petitions for your bankruptcy, however this is very unlikely to happen.
An IVA will impact your credit rating in a number of ways:
Details of IVAs are listed on a public register called the Individual Insolvency Register. The Register is available to search online for free. Although anyone can access the register, it’s unlikely that anyone except your creditors will search it.
Find out how IVAs can affect you in other ways.
An IVA will show on your credit file for six years from the date it begins.
If you have a poor credit record or little credit history, you may see a lot of advertising for credit cards, and you may receive targeted marketing to encourage you to apply for a card.
It's not usually recommended to take out further credit after clearing your debts.
You will need to consider all your options before you apply for a credit card for bad credit. It's important to be cautious about taking one out, and make sure you avoid the card becoming a problem.
You must also get written permission from your insolvency practitioner (IP) if you want to take out more than £500 worth of credit during your IVA.
You may be tempted to apply for credit after your IVA, to try to repair your credit score. However, this could be very expensive and difficult to pay back.
There are other positive steps you can take during and after your IVA, to improve your credit score, such as:
"They were so kind, they listened patiently and helped me through the process" Alison, Kent