An IVA badly affects your credit record for six years, or longer if your IVA doesn’t complete within six years. This article looks at what should happen, how to correct any problems, and how to improve your credit rating when your IVA is completed.
UPDATE August 2016 if you have received a letter from a firm called Bad Debtor you should ignore it! Paying them £50 is a waste of money as it won’t affect your credit score at all. See Don’t pay Bad Debtor to repair your credit record for details.
Even if you have no intention of getting into debt again, a good credit score makes it easier to rent a house, get a mobile contract and it’s essential if you want a mortgage or to be able to re-mortgage at a good rate.
How an IVA should be recorded
After your IVA is approved:
- the IVA will be shown in the Public Record section of your credit record. It can take a few weeks for the entry to appear, but when it does, the date on it will be the date of your IVA started;
- any debts which are included in your IVA but not marked as defaulted, should have a default date added which is the date your IVA started;
- there will be no change for any debts which have already been marked as defaulted or for CCJs;
- there will be no change for any debts such as your mortgage which do not form part of your IVA.
When your IVA ends and you have received a Completion Certificate, the changes to your credit file depend on whether this is less than six years after the date your IVA started or more than 6 years.
If you have completed your IVA in less than 6 years:
- the Public Record section of your credit record will be updated to say your IVA has completed. This IVA marker remains on your record until six years from the start of your IVA. This applies even if you have repaid your IVA debts in full;
- the debts included in your IVA should be marked by the creditors “to show that you no longer owe money on that account (perhaps by marking the entry as ‘partially satisfied’ or ‘partially settled’ or in some other way)” (quote from the Information Commissioner’s Office) and the balance on the accounts should be zero.
After six years everything vanishes and your credit rating will improve:
- the IVA marker will drop off your credit record;
- some of the IVA debts may already have disappeared and the rest should go at the same time as the IVA marker (because their default date should be on or before the date your IVA started.);
- CCJs drop off six years from the judgment date, so they should already have gone by this six year point.
If your IVA lasted more than 6 years:
- the IVA marker will disappear from your credit file;
- the debts in your IVA and any CCJs will already have dropped off your record (because their default date should be on or before the date your IVA started.)
Some creditors only report to one Credit Reference Agency, so you need to check your credit records with all the Credit Reference Agencies to be sure you haven’t missed a problem. You can’t rely on your free Noddle report showing all your debts.
1) Creditor doesn’t use the correct default date
There is no point in complaining to Experian etc about this – they just report what the creditors tell them. You have to ask the creditor to correct the record. I suggest waiting at least 6 months after the start of your IVA before you bother to do this – there is no hurry and it can take a while for your IVA firm to inform all your creditors about your IVA.
Don’t try to do this on the phone because you are likely to spend a frustrating time talking to staff who don’t understand what you are saying. Instead write a letter to the Data Controller for the creditor (get the address from the ICO ), send it Recorded Delivery and keep a copy. For an unsecured debt, the letter could follow this template :
If the creditor replies saying they don’t know anything about your IVA, talk to your IVA firm about whether the creditor has been informed.
If the creditor knows about your IVA but refuses to add or correct the default date, complain to the ICO. Attach copies of your letter to the creditor, proof of posting and any reply from the creditor.
One exception – mortgage shortfall debts are unusual in an IVA but if you have one, read How to repair your credit record after bankruptcy which covers these debts.
2) Creditor doesn’t mark debt as satisfied when your IVA is completed
The creditor doesn’t have to mark the debt as fully settled/satisfied so there is no point in complaining if the debt has been marked as partially settled/satisfied.
If the default date for the debt is on or before the date your IVA started, as it should be, the debt is going to disappear from your credit record six years after that date. If this is very soon, you may decide not to bother with this part of the clean up process and just wait for your file to clear itself.
But if you want to get this corrected, send the following letter to the data controller for the creditor:
Again, complain to the ICO as above if the entry is not corrected.
3) CCJs are not amended
The court only has to mark a CCJ as satisfied if you have paid it in full, which you haven’t – there is no ‘partially settled’ status for a CCJ.
Is it worth doing this?
It is definitely worth correcting the dates of default unless they are just a bit late. If these are months or even years late, then this will delay the time until your credit file is clean as these debts will remain for six years after the default date. If you want to remortgage once your IVA has finished, it is essential that your credit record improves as fast as possible.
Marking your debts as satisfied after you get your Completion Certificate is less important. Even if you get this amended, most applications for credit are likely to be refused whilst the IVA remains on your credit file. If you are close to the six-year drop-off, then you could decide to wait and let that clean everything up. However, getting a debt marked as satisfied will improve your credit rating slightly, which may be enough for you to be approved for a ‘bad credit’ card, see below. It also prevents the debt being ‘sold on’ to another Debt Collector, which is annoying as you have to correspond with yet another person and send them details of your IVA.
Getting positive markers on your credit file
You should aim to start acquiring new, positive credit marks after your IVA has finished. First deal with the “clean up” process outlined above for your old debts. And make sure that you are on the electoral roll, your address and any other details are all correct with the credit reference agencies. This may take several months to complete if you have to go to the ICO.
Then apply for a Vanquis or a Luma credit card. Vanquis is owned by Provident, Luma is owned by Capital One – if you have a debt to one of these firms in your IVA apply to the other one to maximise your chance of being accepted. If you are refused, double-check your credit file really is clean with all three credit reference agencies, wait a few months then apply to the other card.
These cards charge a very high rate of interest. This doesn’t matter because you should aim to use the card every month and repay it in full every month, so you will never pay any interest! If you find your balance is creeping up because you are not clearing it in full, you need to stop spending on the card until it is cleared and have a re-think about budgeting. Your credit rating will not improve faster if you leave a balance on this card.
After you have had one of these cards for a few months, think about getting a cheap monthly mobile phone contract, probably a SIM only one, to get more positive marks on your credit file.
This takes time
If you were expecting the end of your IVA to make an immediate improvement to your credit score, it usually doesn’t, unless it is after the six year point. There isn’t a way to speed this up – firms offering a ‘repair your credit’ service either don’t work at all, or they will be no better than what you can do yourself using the letters here.