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.