Improving your credit score after an IVA

An IVA wrecks your credit record for at least six years. It can be longer than six years if your IVA doesn’t complete within the 6 years, perhaps because you have had payment breaks. .

After your IVA finishes, in theory you won’t need to do anything and all the problems will disappear from your record after the six year point…

But many people have to send some letters asking their old creditors to get things right.

This article has the letters to send and advice on how to improve your credit rating after an IVA.

The process here is the same as cleaning up your credit record after bankruptcy but the details and dates are different as IVAs take much longer to finish than bankruptcy.

Even if you have no intention of getting more debt, a good credit score makes it easier to rent a house or get a mobile contract. And it’s essential if you want to buy a house or re-mortgage at a good rate.

How IVAs should show on your credit record

What should have happened in the first few months of your IVA

If you look at your credit records (see How to check your credit record for free – there is no need to pay for this!) a few months after your IVA has started you should see:

• the IVA shows in the Public Record section of your credit record. It can take a few weeks for the entry to appear;
• all debts in your IVA should be marked as defaulted;
• the default date for every debt included in your IVA should be the date your IVA started or earlier;
• there will be no change for any CCJs even though they are in your IVA;
• 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 your IVA completes in less than 6 years

By “completed” I mean you have received your completion certificate – that is the important date, not when you made your last payment.

Your credit record will be updated to say your IVA has completed.

The IVA marker will stay – it only drops off your credit record six years after the start of your IVA. This applies even if you have repaid your IVA debts in full. This is very annoying as the IVA marker makes it virtually impossible to get a mortgage, but there is nothing you can do to change this.

All the debts in your IVA should have their balance owed set to zero. The ICO says the debts should be marked “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)“. How this is reported depends on what credit report you are looking at, but in practice it doesn’t matter providing the balance owed is zero.

CCJs in your IVA will not be changed – they cannot be marked as”partially satisfied” – except in the unusual situation where you IVA has repaid 100p in the £ to all your debts.

If all the above has happened correctly, after six years everything vanishes and your credit rating will improve dramatically:

• the IVA marker disappears from your credit record;
• some of the IVA debts may already have disappeared (because their default date was before your IVA started) and the rest should go at the same time as the IVA marker (because their default date is the same as your IVA);
• CCJs drop off six years from the judgment date, so they will already have gone by this six year point.

What happens if your IVA lasted more than 6 years

The IVA marker will disappear from your credit file immediately – well it may take a week or two!

All the debts in your IVA and any CCJs will already have disappeared. Debts drop off 6 years after the default date, and this should have been on or before the date of your IVA.

Correcting problems

It’s not difficult  – just be organised!

To make sure everything is right check your credit records with all the Credit Reference Agencies because some creditors only report to one of them.

With all the problems below, you need to get the creditor to correct the problem. Don’t waste your time trying to get the credit reference agencies – Experian, Equifax and Call Credit – to change anything because all they will do is send your complaint to the creditor.

All complaints here should be in writing – don’t try to resolve problems on the phone or you will be talking to someone who probably hasn’t a clue what an IVA is.

Send the letter below recorded delivery to the Data Controller for the creditor (get the address from the ICO). Keep a copy of letters you send and the proof of postage.

This makes it sound as though these issues are hard – they aren’t! You send a simple letter to the right person and 99% of cases are easily sorted.

When and how to get a default date corrected

I suggest waiting at least 6 months after the start of your IVA before you do this. It can take a while for your IVA firm to inform all your creditors about your IVA and there is no hurry because your credit record is going to be dreadful for years anyway. But it’s best to deal with this well before your IVA ends – you don’t want to add delays on afterwards.

Here is the letter to send to the Data Controller for the creditor:

If the creditor replies saying they don’t know anything about your IVA, tell your IVA firm.

If the creditor knows about your IVA but refuses to add or correct the default date, complain to the Financial Ombudsman.  Attach copies of your letter to the creditor, proof of posting and any reply from the creditor.

This works! In one Financial Ombudsman decision, the Ombudsman decided that:

MYJAR hasn’t explained why it has departed from [the ICO’s guidance] and I can see no good reason for it to have done so.

One rare situation… mortgage shortfalls (if you sold a house and it wasn’t enough to repay the mortgage) are unusual in an IVA but if you have one, read How to repair your credit record after bankruptcy which covers these debts.

If a creditor doesn’t mark balance as zero when your IVA is completed

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 just a few months, your file will clear itself then so it’s probably not worth bothering with this.

But if you want to get this corrected, send the following letter to the data controller for the creditor:

Again, complain to the Financial Ombudsman as above if the entry is not corrected.

NB 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.

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. So CCJs will remain on your credit record with a balance showing and you can’t get this changed.

Is it worth doing this?

It is definitely worth correcting the dates of default unless they are only a few weeks late.

If default dates are late or missing, they 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.

Getting the balances set to zero 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, if the balances are all zero, although this doesn’t improve your credit score at all, it may be enough for you to be approved for a ‘bad credit’ card, see below.

A zero balance 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. If you don’t, when your credit record becomes clean, it is also very empty with nothing good showing.

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.

Then there are two options.

1) get a bad credit card

Then apply for a bad credit card – well-known brands are Vanquis, Aqua and Luma credit card.  Vanquis is owned by Provident, Luma is owned by Capital One – avoid one you had a debt in your IVA to.  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 another card.

But these cards can be the slippery slope back into problem debts.  Read Bad credit cards and how to use them wisely before you apply for one:

• your credit rating will not improve faster if you leave a balance on this card
• your credit score is maximised by using the card every month for something small and repaying the card in full every month.

2) Save with LOQBOX

This lets you save money every month for a year and reports this to the credit reference agencies as a loan you are repaying, so your credit score improves. When all your IVA debts go, there is then this simple loan which you have repaid on time so your credit score is good! See how LOQBOX works for more details.

This all 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 selling 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.

It doesn’t make any difference if you settled your IVA early

If you settle your IVA early, your credit record doesn’t automatically improve, as the IVA and the defaulted debts in it will still stay for 6 years, see Settling your IVA early and its effect of your credit score.

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