Ability to gain further credit

Summary: This article discusses the ability of those in an Individual Voluntary Arrangement (IVA) to gain further credit, both while the arrangement is ongoing, and after it is completed.

Can those in an IVA obtain credit?

One of the key differences between an IVA and bankruptcy is that an IVA doesn't automatically prevent an individual obtaining further credit, where there is a restriction of £500 on the amount of credit that can be taken when bankrupt. However, an IVA is a legally binding agreement, and as it is there to assist those in financial difficulty struggling to repay debts, it is often written into the agreement that no credit is to be obtained throughout its duration. Should additional credit be obtained without prior approval, this could result in the failure of the IVA. That said, if there is a very good reason for requiring additional credit, the IVA supervisor must be informed and approval given.

How easy is it to obtain credit while in an IVA?

As with bankruptcy, an IVA will be logged on the credit record. This could have an impact on getting further credit, even if it has been approved by the IVA supervisor. It remains on the record for a period of 6 years and therefore could also impact after the IVA has been completed. It is also a condition of the IVA that the individual advisers any potential lender of their circumstances, which in itself could result in the lender walking away.

Obtaining credit after an IVA ends

The average duration of an IVA is 5 years, with the details being logged on the individuals credit file for 6 years, so for at least 12 months after the IVA has ended, lenders may still refuse credit. After 6 years, the credit agency should automatically update the credit record to remove the IVA, and if they don't, the individual may write to them to request its removal. Once it has been removed, assuming the IVA was completed successfully, the credit rating will start to improve and it will become easier to get credit.