What does an IVA do to your Credit Record... What can you do about it?

When you enter an IVA

When you enter an IVA it marks the "official" breakdown of the relationship between you and your unsecured creditors. The IVA itself will be entered on the Insolvency Service Register, which is open to public scrutiny. From there it will be reported to the Credit Reference Agencies and entered on your credit files in the Public Record section.

Any debts included in the arrangement, not already marked as defaulted, should be marked as in default with the date of default being on or before the start date of the IVA. As time goes on some creditors will report the account as being in default every month -- do not panic! These are not new defaults, simply reports that the account is still in default.

Different creditors report to different agencies and records can vary between them, so it is important to keep an eye on all three. They are Equifax (who partner ClearScore), Experian and Call Credit (who partner Noddle).

This state of affairs will remain as such for 6 years from the start of the IVA, or until the IVA is completed if it lasts longer than 6 years and your credit record will be at an all time low. You can keep an eye on things during your IVA using free online services such as Noddle and ClearScore. I would suggest having a look towards the end of your first year --- by then messages will have filtered through the system and you will have plenty of time in the years ahead to correct any glaring mistakes. There is, however, little to be done unless default dates need amending.

If any creditor hasn't marked the account as in default, or used the wrong default date this needs to be amended (remember, this date should be on or before the start date of the IVA, but a few days late will make no difference in the grand scheme of things). The agencies themselves will advise, but cannot amend the entry as they simply record what the creditors report to them. You will have to contact the creditors yourself directly. You need to do this in writing (keeping copies and sending by recorded delivery) and address your request to the Data Controller of each creditor concerned. Do not wite to their general enquiries address.

You can get the details of the Data Controllers from the Information Commissioner's Office (ICO). Your letter should be along these lines:

If they refuse to cooperate complain to the ICO, attaching copies of correspondence to and from the creditor and proof of posting. It can take some time, but the ICO should convince the creditor of the error of their ways.

So, we can continue along our journey with everything correctly recorded at the three Credit Refrence Agencies (though it does no harm to keep an eye on things). All have very informative websites and you have plenty of time to become a credit reference guru.

Once you have made your final payment

Once you have mad your final payment into the arrangement (YHEY!! -- but not quite over yet) your IP will conduct a final review before issuing you with the Holy Grail -- your Completion Certificate / Notice of Due Completion. This isn't as impressive as it sounds but is an important piece of paper which can take up to 6 months to arrive, but is often much faster. Until you have this you are still in the IVA and bound by its terms.

When your IP issues the certificate the Insolvency Service is also informed. They, in turn, report to the three credit reference agencies. You will be removed from the Insolvency Register within three months, in the meantime your arrangement should be shown there as completed. Also, within a few months, your IVA should be shown as completed in your credit files and defaulted accounts should be marked as satisfied / partially satisfied and show a zero blance. Whether you want to challenge any creditor who doesn't do this is up to you, considering that the whole shebang, however marked, will drop into oblivion on the 6th anniversary of the default date anyway. If you do want this corrected then, again, the Data Controller is the person to write to.

When the 6th anniversary arrives

When the 6th anniversary arrives, assuming we have everything dated correctly and, of course, the IVA has completed within this time-frame, the IVA itself and the associated defaults will disappear and you will have a squeaky clean credit file. Your credit rating should improve drastically, practically overnight!

I would suggest waiting a couple of months after the 6th anniversary before obtaining statutory credit reports from each agency ( £2 a time) to check everything --- do look out for any Notices of Correction that might have been lodged -- these do not drop off after a given period and their removal must be requested.

A clean slate is great

A clean slate is great, but a good history is better. You need to go about collecting "green ticks" on your files to demonstrate that you can handle credit safely and inspire confidence in prospective lenders / landlords / utility suppliers. Running your current account at the bank correctly is a good start, as will be reports from your mobile phone supplier. In addition you coud apply for an "adverse credit" credit card, such as Vanquis (Provident) or Luma (Capital One) --- if either were a past creditor, apply to the other one. There are more entering the market all the time. The interest rates are eye watering, but, limit it's use to, say, petrol only, and pay back in full each month and you won't incur interest anyway. If refused wait a couple of months before applying elsewhere as searches leave a footprint on the file.