How to clean up your credit file after an IVA

It could be just around the corner. Or maybe it’s already happened. That joyful day when your IVA is finally complete. Apart from being incredibly proud of your achievement, you may also be starting to think about what to do with your money now that it’s your own again. And who could blame you!

But, chances are your IVA will have left its mark on your credit file and it’ll take a little bit of elbow grease to erase it.

Even if you’re not thinking about taking out new credit, there may come a time when you’ll need it to support your plans whether it’s securing a mortgage or financing a new car. So, we’d recommend taking some time now to improve your score as much as you can.

What happens next?

Firstly, you’ll receive your signed IVA Completion Certificate from StepChange VA. This is your proof that your IVA is complete – well done you!

The Insolvency Service will also mark your IVA as completed and update their records to reflect this.

How do I get my credit report?

Now that your paperwork is in order, you’ll need to get a copy of your credit report which, thanks to our good friend the web, has never been easier to do.

In the UK, there are three credit reference agencies (CRAs):

All three agencies will give you access to your credit report online, for free. You can sign up to Martin Lewis’s Credit Club for free and you’ll receive a full copy of your Experian report.

You’ll also see advertising for products like credit cards and loans based on your credit score. If you want to avoid the ads entirely, you can ask for a paper copy of your report to be sent through the post. It’ll cost £2, and there are no strings attached.

To get a complete picture of your credit report you’ll need a copy from each agency, as creditors don’t always register information with all three CRAs.

Understanding what’s on your credit report

When it comes to understanding your credit report it may feel like a combination of science, maths and witchcraft. We promise you, that isn’t the case.

Each agency has its own scale and scoring system (for example, Experian’s is between 0 and 999) but don’t worry too much about this. All you need to know is that when you manage your credit effectively, you’ll be ‘rewarded’ by an increase in your score.

If you don’t manage your credit effectively you’ll have points deducted. The lower your score, the harder you’ll find it to take out new credit or get the best deals.

When you borrow money, information about the arrangement will be shown on your file, such as when you applied, who the agreement is with, how much you borrowed and payments you’ve made or missed.

If you pay for any of your bills with credit, these accounts will also appear, such as:

  • mobile phones
  • monthly utilities, or
  • car insurance.

You can find more information on credit ratings and how they work.

When your IVA started, it was registered on your report for six years from that date. So, if your IVA lasted five years, it’ll still be showing on your report for another year once it’s finished.

Where you have defaults listed on your report, check the dates to make sure they weren’t registered after your IVA started. That way, they’ll also disappear within the next 12 months.

If they were registered after your IVA started, get in touch with your creditors as they’ll be able to correct your report.

A clean bill of health

The great thing about your credit report is that it’s a snapshot of information over six years, which means it’s constantly changing and over time it can heal. Once you pass the six-year mark from when your IVA started, your credit report should have a clean bill of health.

But, chances are you won’t be left with a credit score that’s fighting fit. As we mentioned earlier, you’ll need to show credit reference agencies that you can manage your money before they’ll reward you with a good score.

That means you’ll probably have to take out new credit, like a credit card or loan to build your score back up. If this is something you’re considering, remember our five top tips:

  1. Only use small amounts of credit
  2. Never miss a payment
  3. Stay within your agreed limits
  4. Ideally use no more than 50% of your total available credit
  5. Aim to pay the balance in full every month and avoid paying interest

(Chances are you’ll be stung with a higher interest rate due to your low credit score which is why tip 5 is important.)

Save your way to a better credit score

If you’d rather not take out new credit, there are alternatives. Loqbox helps you build up your credit score while saving money at the same time.

Here’s how it works.

  1. Choose how much you want to save every month between £20 and £500.
  2. Buy a Loqbox (think of it as a digital safe) worth 12 times those savings.
  3. Instead of paying for your Loqbox outright, you’re given interest-free finance to pay for it. Your monthly payments for the finance will be equal to the savings amount you agreed.
  4. Each payment you make will be registered with all three CRAs, showing lenders that you’re responsible with your money and can manage credit – yay!
  5. At the end of the 12 months, your Loqbox will be paid for, and you can unlock it, releasing all of your savings.

If during the 12 months your situation changes, you can unlock your box at any time and withdraw all of your money. There are no fees or penalties to do this. It’s better to unlock your box than miss a payment, as this will have a detrimental effect on your credit file.

We don’t endorse Loqbox or receive any financial incentive from linking to them, but we think their product could be a good idea for people coming out of debt.

What do you think?

Are you concerned about taking out new credit? Are you working hard towards improving your credit score?

In your experience has your credit rating affected plans you’ve made after your IVA?

Did we miss any good tips on how to rebuild your credit score? Let us know in the comments section.


Posted by in Living with debt