A reader who has settled his Individual Voluntary Arrangement (IVA) early asked:
My IVA is still showing on my credit history. The start date was January 2014. I have been removed from the Insolvency Register.
I have now [mid 2018] been told that I have to wait for another 18 months before the IVA will be removed. Is that right? I am sure you have heard it all before but none of this was in the agreement and I was told a different story as to when the IVA is paid I would be free of this curse. Surely this should be 5 years at the most?
The IVA marker stays for 6 years even if the IVA is settled early
An IVA that is completed in under six years will disappear from your credit record six years after it started. Where an IVA takes more than six years to complete, it stays on your credit record until it is finished.
It doesn’t make a difference that the IVA was completed early. This happens because your credit record shows your credit history, not just your current situation.
So what the reader has now been told is correct.
Is this fair?
There is a general rule for credit records that problems more than six years ago are deleted. This applies to defaulted debts and CCJs. It also applies to the other two forms of insolvency, bankruptcy and Debt Relief Orders – so it’s logical that it should apply to IVAs as well.
The only point where this feels unfair is the rare case where someone has repaid all their debts in full through the IVA, so nothing has been written off.
There is a way to do this for bankruptcy – if you pay all your debts plus the bankruptcy costs, you can apply for your bankruptcy to be annulled and then the bankruptcy marker is deleted. But you can’t do this for an IVA.
Can you improve your credit score before the 6 year point?
Completing your IVA early doesn’t improve your credit score at all. But once your IVA has ended, you can start to clean up your credit record and get some positive markers added, see How to improve your credit score after an IVA.
This won’t make a lot of difference to your credit score in the short term. While the defaulted debts and the IVA itself are still showing, the new positive marks don’t help much – your credit score is unlikely to get up to be “good”.
But doing this now means that after the six-year point, when the IVA and all the debts included in it have dropped off, your credit record will be looking great, not just “empty”.
So think why you want to settle your IVA early
Some people want to end their IVA because they find it very stressful and intrusive. Perhaps family have offered to help out and you just want to put the debts and your IVA behind you and feel free. If you are expecting a big improvement in your situation, then you may be anxious to settle now for as little as possible. All good reasons…
But if you want to end your IVA so that you can rent a different house easily, get a mortgage, or get car finance on reasonable terms, or get a job where having had an IVA is a big problem, then you need to stop and think.
Settling your IVA early will not help you with any of these credit-related problems as the IVA will still be on your credit records for six years.
This also applies if your IVA firm suggests that you could end your IVA by taking out a loan. The loan will only help your credit record after the six year point, not before. And if your IVA runs to the end, you can still start the process of improving your credit record when it finished so this loan isn’t needed to get a good credit score after six years.
Do you want to settle your IVA early?
What happens if you can’t afford your IVA?
Overtime, a new baby & an IVA
james says
I have some agreement with a credit card company but it is not called an IVA but and agreement to pay back monthly of some sort. It was sold to a debt collection agent and they just send me a letter once a year stating it is being kept in place.
In 2013 I went abroad for five months and thought all of my cards were being automatically being paid off by direct debit, for some reason this card was not and so when I got back I found it was in default.
I told the company it was an accident and could pay off the arrears immediately but they said it was too late and there was nothing I could do, it is in default and so I pay £13 per month by DD with no interest added.
It has caused my credit scoring to go from the best possible to very poor but there is nothing I can do about it for six years.
I could pay it off early but I read it stays on my report for 6 years anyway and then is not included in the report after six years so I though “xxxx” , why pay it off so I will leave it to run well past the 6 year public report limit which is next year.
I do not need to apply for any new credit as I have current credit cards at very low 3.9% interest for life and I do not need any loans, I own my own home etc so I will leave it.
Mr Starr says
I was in an IVA and settled early. Some of my creditors have kindly listed the outstanding balances/accounts as settled, however, some are still listed as Default. I am going to see if I can get these amended to reflect the actual situation otherwise, I will have to wait until 2023! I am saving hard and hoping to apply for a First Time Buyers mortgage in the next couple of years rather than in 3 as I currently live with my parents and this situation is not ideal! Has anyone had any joy in getting default notices amended/removed following an IVA?
Sara (Debt Camel) says
Did your IVA start in 2017?
MrStarr says
Yes it did. I settled back in November last year.
Sara (Debt Camel) says
Then the IVA will remain in your credit record until 2023 and make it VERY hard to get a mortgage except at a very bad rate.
Getting the defaults removed will not help much at all.
“I am going to see if I can get these amended to reflect the actual situation “
the actual situation is that you defaulted and the debts have now been partially satisfied. There is no reason at all why a creditor should agree to remove a default.
MrStarr says
Thanks for this. Will have to play the waiting game then!
Paul says
I have just completed an IVA in January after 6 years, I have not received my completion certificate however on clear score it shows as Discharged does this then remove the IVA from my credit report when it next updates and would this be the same once all the other credit agencies have been notified
Sara (Debt Camel) says
See https://debtcamel.co.uk/end-of-iva/ for what should happen and how to check it. And chase up why you don’t have the completion certificate – you want that bit of paper.
Sally Turner says
“This won’t make a lot of difference to your credit score in the short term. While the defaulted debts and the IVA itself are still showing, the new positive marks don’t help much.”
This is absolutely false. Readers, don’t let this put you off doing what you can to improve your credit score. I settled my IVA early, and immediately took on a credit building credit card and only used it for one grocery shop a month, making sure I paid it off diligently, kept up all my utility payments, signed up with Creditladder, so my rent payments counted towards building my credit, lived responsibly within my means, and within 18 months, my credit score is in the high end of “fair”, approaching “good”. My IVA will still be on my record for another two years, and it’s really not stopping my credit score increasing slowly but surely.
Bad advice in this article, to be sure.
Sara (Debt Camel) says
I am not trying to put anyone off improving their credit score – it is a very good idea to go through the repair process. I give full details on how to do this in https://debtcamel.co.uk/repair-credit-record-iva/ which is linked to in the article above.
Sally Turner says
Yes, but you say it doesn’t help much, and that’s absolutely not true. 18 months ago my credit score was poor. Now it’s reaching being good. It does help, a lot.
Sara (Debt Camel) says
I see too many people expecting big improvements when they settle an IVA early.
You will really struggle to get car finance at an OK rate, anything other than a credit builder card or a mortgage while the IVA remains on your record.