{"id":12027,"date":"2011-09-05T15:00:22","date_gmt":"2011-09-05T14:00:22","guid":{"rendered":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/?p=12027"},"modified":"2019-10-31T15:10:31","modified_gmt":"2019-10-31T15:10:31","slug":"iva-and-credit-rating-2","status":"publish","type":"post","link":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/iva-and-credit-rating-2\/","title":{"rendered":"IVA and Credit Rating"},"content":{"rendered":"\n

When an insolvent debtor enters into an Individual Voluntary Arrangement (IVA) with creditors, all unsecured accounts automatically go into default, given that the debtor immediately ceases to comply with the terms and conditions of the relevant credit agreements. <\/p>\n\n\n\n\n\n\n\n

Some of the debtor\u2019s accounts may already have been in default prior to the commencement of the IVA. All defaults are recorded on the debtor\u2019s credit files which are maintained by credit reference agencies such as Experian and Equifax. Access to and publication of such personal financial data relating to insolvent individuals is not prohibited by the Data Protection Act. The business of the credit reference agencies is to retrieve such data, record it on the debtor\u2019s credit file and sell it to interested parties provided that they have a consumer credit license. This is how the credit reference agencies make their money. Thus banks, mortgage providers, HP providers, credit card providers and even trading creditors may be able to access the credit files of the private citizen. For a small fee any private individual can access their own credit file. Indeed, in certain circumstances, a private citizen can obtain the credit file of another person if for example both individuals are living in the same property, whether or not they are co-habiting.<\/p>\n\n\n\n

\"Checking<\/figure>\n\n\n\n

The record of such defaults remains on the debtor\u2019s credit file for \nsix years from the time that the default occurred. When a debtor enters \ninto an IVA, default data relating to that debtors accounts and debts \nwill not be removed from the credit files for six years, even if the \ndebtor successfully complete his or her IVA and obtains a Certificate of\n Completion (of the IVA) from their IVA supervisor.<\/p>\n\n\n\n

A standard condition of any IVA is that the debtor does not acquire \nany credit and does not enter into any credit agreement without the \nexpress permission of their supervisor. The supervisor\u2019s discretion in \ngranting such permission is also restricted and may require the express \npermission of the debtor\u2019s creditors. There are usually some practical \nexceptions to this requirement. Such exceptions are anticipated and \nstated in the debtor\u2019s IVA proposal. For example, the debtor will \nusually be allowed to incur credit in regard to certain utilities such \nas water charges and electricity and gas services but a monetary ceiling\n is normally imposed on such items of expenditure e.g. no more than \u00a3500\n credit may be incurred in respect of such an item. The debtor\u2019s credit \nfiles will carry the records of such credit activities. It is important \nthat the debtor maintain the payments as they fall due in respect of all\n forms of credit permitted in accordance with the terms and conditions \nof the IVA. On completion of the IVA, the debtor can expect his or her \ngood track record relating to the servicing of such credit to be viewed \npositively by creditors.   <\/p>\n\n\n\n

In regard to the debtor\u2019s secured debts, the IVA requires that the debtor continue to service these. However, if for example, the debtor needed to change their car during the term of the IVA and enter into a new HP agreement, then the express permission of the supervisor and creditors would have to be obtained. A prescient debtor might anticipate that this need could arise and could state it up front in the IVA proposal but nevertheless it will still be necessary to clear it with the IVA supervisor before proceeding with the matter. If the debtor wanted to re-mortgage their property to release equity or to extend the term of their mortgage (thereby reducing monthly mortgage payments) or to switch their mortgage payments from a repayment basis to an interest only basis, again they would have to obtain the express permission of the IVA supervisor and of creditors.<\/p>\n\n\n\n

In considering any request for credit facilities, whether during the life of the IVA or following its successful completion, creditors will naturally check on the debtor\u2019s credit history as recorded in their credit files. The debtor may be refused credit by some lenders if the credit files still carried records of defaults. Even if credit is granted, the debtor may have to pay premium interest rates. For example, if the debtor were to seek to take out a mortgage for example, lenders would be likely to seek a higher deposit than they would if the debtor had a clean credit history and it would not be unusual to be quoted interest rates as much as 6% to 8% greater than high street rates.<\/p>\n\n\n\n

On the other hand, creditors will take into account that the debtor \ndealt with his or her former financial difficulties by entering into an \nIVA, by complying with the terms and conditions of the IVA and by \nsuccessfully completing it. They will also consider how the debtor \nmanaged any credit they were permitted to access while in the IVA (e.g. \ncredit used to pay for utilities). The conduct of the debtor in the IVA \nmay well have a crucial bearing on whether they can obtain post IVA \ncredit and what interest rates they may be charged. It is certainly \neasier to access credit after completing an IVA than it is after being \ndischarged from bankruptcy.<\/p>\n\n\n\n

Entering an IVA certainly affects credit ratings. However, six years \nfrom the dates that the defaults commenced, the credit reference \nagencies are supposed to automatically update the debtor\u2019s credit files \nand remove all references to their defaults. A debtor who finds that \nthis has not been done can request the credit reference agencies to do \nso. If they do not get a satisfactory response, they can invoke the \ncomplaints procedures of the relevant credit reference agency to ensure \nthe matter is dealt with so that they can begin to repair their damaged \ncredit ratings.<\/p>\n","protected":false},"excerpt":{"rendered":"

Entering an IVA certainly affects credit ratings. However, six years from the dates that the defaults commenced, the credit reference agencies are supposed to automatically update the debtor\u2019s credit files and remove all references to their defaults. <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-12027","post","type-post","status-publish","format-standard","hentry","category-iva-articles"],"_links":{"self":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12027","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/comments?post=12027"}],"version-history":[{"count":1,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12027\/revisions"}],"predecessor-version":[{"id":12037,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/posts\/12027\/revisions\/12037"}],"wp:attachment":[{"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/media?parent=12027"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/categories?post=12027"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationaldebtrelief.co.uk\/debt-articles\/wp-json\/wp\/v2\/tags?post=12027"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}