If you're struggling with debt, you may be considering an Individual Voluntary Arrangement (IVA).
But what will this do to your credit score? In this blog post, we'll explore how an IVA can affect your credit rating.
We'll also provide some tips on how to rebuild your credit after an IVA.
By the end of this article, you should have a better understanding of how an IVA can impact your financial future.
What Is an IVA?
An Individual Voluntary Arrangement (IVA) is a legally binding agreement between an individual and their creditors.
This arrangement allows you to pay off your debts at an affordable rate over a set period of time, usually five years or less.
During this period, interest on the debt is frozen and creditors are prevented from taking any legal action against you.
After the IVA term is completed, any remaining debt is written off.
The Benefits of an IVA
Although an Individual Voluntary Arrangement (IVA) can have a negative impact on your credit score, it also has many benefits.
It allows you to consolidate all of your debts into one affordable repayment and makes managing them much simpler. An IVA also stops creditors from taking any legal action against you and can help you get back on track financially.
Overall, an IVA can be a great option for those struggling to keep up with debt repayments.
However, it's important to understand how it might affect your credit score and take steps to rebuild it afterward. With the right approach, you can start to improve your rating and get back on track financially.
Finally, if you're considering an IVA, it's important to seek professional advice from a debt adviser or financial advisor. They can help you understand the implications of an IVA and how it could affect your credit score.
We hope this blog post has helped you better understand how an IVA can affect your credit rating and what steps you can take to improve it after the agreement is completed. Good luck!
What Is Your Credit Score?
Your credit score is a three-digit number that lenders use to determine your creditworthiness. This score is based on information found in your credit report, such as the types of accounts you have open, any late payments or defaults on those accounts, and so on.
Generally speaking, the higher your credit score, the easier it will be for you to access credit and the more favorable interest rates you may be offered.
An IVA Affects Your Credit Score
An IVA can have a serious impact on your credit score. When you enter into an IVA, it is noted on your credit report and this will remain visible for six years after the agreement is completed. This means that potential lenders may be reluctant to offer you credit during this time as they will see you as a higher risk.
Also, any missed payments on your IVA may also be noted on your credit report, so it's important to keep up with the repayments.
However, an IVA can also be beneficial for your credit score in some cases. For example, if you have struggled to keep up with multiple debt repayments and an IVA will help you consolidate your debt, this could be seen as a positive by lenders. An IVA can also help you get back on track with your finances and manage your money better.
How To Rebuild Credit After an IVA
Once an IVA is completed, it's important to start rebuilding your credit score as soon as possible:
- Make sure all payments on your IVA were made on time. This will be noted on your credit report and can help improve your rating.
- Consider taking out a credit builder credit card. These are designed for people with bad credit and can help you rebuild your score over time.
- Pay all other bills and debt repayments on time. This shows lenders that you are reliable and responsible with money.
- Make sure your credit report is accurate by requesting a copy of it from the credit bureaus. You can then dispute any errors which could be damaging your score.
How to Apply for an IVA
If you’re considering an IVA, the first step is to seek professional advice from a debt adviser or financial advisor. They can help you understand the implications of an IVA and ensure that it is right for your circumstances.
After discussing your finances with a professional, they may advise that you proceed with an IVA. You will then need to seek out an Insolvency Practitioner (IP) who the Insolvency Service approves. They will assess your finances and advise whether you’re eligible for an IVA.
If your application is successful, the IP will draw up a proposal that outlines how much you will pay each month and how long the agreement will last. The proposal will then be sent to your creditors who can vote on whether to accept or reject it.
If your IVA is accepted, you must make the agreed payments each month for the duration of the agreement for it to be successful. It’s also important to remember that an IVA may affect your credit score and it’s important to take steps to rebuild it after the agreement has been completed.
We hope this blog post has helped you understand more about how to apply for an IVA and what implications it could have on your credit score. Good luck!
This article was produced and syndicated by Wealth of Geeks.