How to rebuild your credit rating after an IVA

Coming out of the other side of an Individual Voluntary Arrangement means that you now have freedom over your money again. However, whilst this can be exciting, there are still steps you need to take in order to rebuild your credit rating. Below we offer some tips to start your road to recovery.

In This Guide:

What are the first steps to take?
Look at your credit file
How to understand what’s on the credit report
What happens 6 years after you started your IVA?
Getting back on track after an IVA
How to get a better credit score
It will take time

What are the first steps to take?

The first thing you need to get is your IVA completion certificate which should be signed by your Insolvency Practitioner. This acts as proof of your official IVA completion.

Once your record of your IVA is marked as completed by the Insolvency Service, you can start sorting out your credit rating and file.

Look at your credit file

Before you start the rebuilding process, we suggest you look at what is actually on your credit file first. There are three credit reference agencies in the UK - Callcredit, Equifax and Experian. You can access your credit report from all three companies. They can give you a one-off ‘statutory credit report’ online or by post for just £2.

How to understand what’s on the credit report

Each agency will have a different scoring system but don’t worry too much about this. All you need to know is that when you manage your credit effectively you are rewarded by an increase in your score. If you fail to manage credit effectively your score will then be reduced.

The lower your score is, the harder it will be for you to take out new credit or get the best deals.

Once you have received all your credit reports, we suggest you compare them against each other and look closely at all the details. It’s rare to find any differences but it’s best to check just in case. Keep in mind that credit reports only stretch back 6 years.

You should also look out for any adverse information after your IVA started. It is unlikely that any new information will have been added regarding your debts, but if there are any anomalies you should address them as soon as possible.

You should also bear in mind that not all accounts on your credit report will be CCA regulated companies (lenders). There may be payments such as those made to your mobile phone provider or utilities on your report too.

Your IVA will stay on your credit file for 6 years after the day you started it.

What happens 6 years after you started your IVA?

Once your IVA has passed the 6-year mark you’ll notice that it is no longer listed on your report. However, this does not mean you will be able to get a clean rating right away, so you will not be able to get credit again instantly.

Your credit rating is essentially starting from scratch again and you will have to build it up slowly so that your credit file becomes attractive to lenders again.

Getting back on track after an IVA

Managing to live in this day and age without any form of credit is an achievement and it would be understandable if you never wanted to take out credit again.

However, we advise that you still try and repair your credit file as best as you can. Having a good credit score may help with getting a mortgage, and you also don’t want to be caught out with a bad credit score should you need the credit following your IVA.

How to get a better credit score

Once you have dealt with your credit file there are then two options to gain a good credit score:

Get a bad credit card

By applying for a bad credit card such as Vanquis, Aqua and Luma, you can then show you can use the credit wisely. Don’t make large purchases and get yourself into debt again as this will only make things worse. You need to show that you can be responsible with the credit. For example, if you pay for smaller purchases using the card, for example a tank of fuel, and can pay off the card in full each month, your credit score will go up.

Save with LOQBOX

This is a new option that was only introduced in 2017. This allows you to save money every month and then report this to the credit reference agencies as a loan you are repaying, which then means your credit score improves.

It will take time

Remember that this whole process will take time. It is a great achievement to have completed your IVA, but it does not give you a free pass to immediate improvement. You must keep working slowly to build up your score and in time, it will come.