Will an IVA affect my credit score in Northern Ireland?

An Individual Voluntary Arrangement (IVA) will negatively affect your credit score. It is recorded on your credit file and will remain there for six years, even after the IVA is completed. While the IVA is active on your credit report in Northern Ireland, lenders may view you as a high-risk borrower, which will make it difficult for you to obtain credit.

Even though an IVA will have a negative impact on your credit file, it can still be an appropriate option for those individuals struggling under the weight of unmanageable debt problems.

An IVA is a formal insolvency process entered into by an individual when they are no longer able to keep up with the monthly repayments required on their unsecured debts. An IVA allows an individual to repay the money they owe through a series of affordable monthly instalments over a set period of time, typically five years. At the end of the IVA any remaining unsecured debt will be written off.

Due to this, lenders such as banks and other finance providers, are understandably going to be more wary of lending money to individuals who have already demonstrated a problem in paying back the money they owe.

As an IVA is recorded on your credit file, any potential lender will be able to see this when you apply for credit – such as a loan, mortgage, or credit card – and they are likely to look upon this unfavourably.

Despite the negative effect an IVA will have on your credit score – and therefore your ability to access credit in the future – they can still be a great option for those who are struggling to pay their debts.

This is because, when you find yourself deep in debt, the chances are that you will end up missing monthly payments towards your debts anyway. These will all be recorded on your credit file.

Therefore, it is often the case that an individual’s credit history has already been damaged by missed payments even prior to an IVA being entered into.

An IVA will appear on your credit file for six years from the date it begins. This remains the case even if you successfully complete the IVA early – through making a lump sum payment – or if the IVA is terminated early due to non-payment.

Simply put, ending the IVA will not automatically remove it from your credit file; it will stay there for six years from the date you enter the IVA.

Once the IVA is removed from your credit file, you can start taking steps to rebuild your credit score, which will increase your ability to obtain credit.

This may be a slow process, but there is light at the end of the tunnel as so long as you can demonstrate your ability to handle small amounts of credit, it is possible that you will eventually be able to obtain more significant levels of borrowing such as a mortgage.

If you are considering entering into an IVA as a way to deal with your debt problems, you should make it a priority to speak to an expert before going ahead. At Northern Ireland Debt Solutions, our team of expert debt advisors are here to talk you through your situation and help you understand your options. Contact the team now for immediate help and advice.