Individual Voluntary AgreementsFirst, let’s look at what an IVA (Individual Voluntary Agreement) actually is. It is a legally binding document that’s set up by an insolvency practitioner between an individual and their creditors. It will also be recorded in the public Insolvency Register so financial service providers will be able to see it. It’s a form of insolvency, but it isn’t the same as being declared bankrupt.
An insolvency practitioner will be someone like a solicitor or accountant, approved by the court, who will look at your finances in detail and help to draw up an affordable payment plan. An IVA typically lasts for five years and during this time the insolvency practitioner will deal with creditors on your behalf. You’ll pay a fee for this service.
When the plan drawn up by the practitioner is accepted, all charges and interest will be frozen and creditors won’t be able to demand more. You must, however, keep up payments to the insolvency practitioner who will take off their fee and then allocate the rest to the creditors on an agreed schedule. If your circumstances change and you can’t meet the payments then you could still be declared bankrupt unless your creditors are willing to renegotiate.
When the period of the IVA reaches its end, any further debt should be written off and the record removed from the Insolvency Register. It stays on your credit record for an extra year afterwards.
Credit recordsSix years after it was first started, an IVA won’t show on your credit record. But, even if your file shows up as clean, most lenders will ask as part of their application process if you have ever had an IVA. If you answer yes then they may still choose to decline your application even though the IVA is no longer on record. You may still, therefore, have to turn to poor credit mortgage brokers in order to find someone who will lend to you.
There’s another factor too, and that is that a clean credit record is not the same as a good credit record. If you have no record of making payments regularly and on time then lenders won’t know whether or not you are a good risk.
So, what can you do to start rebuilding your credit record? The first step is to find out what is on your record at the moment. You can get this data from the main credit reference agencies such as Equifax, Experian and Callcredit. There are also sites including MoneySavingExpert.com that will let you access your report for free.
When you get your report you need to check that all of your personal details - name, address, date of birth, etc - are correct and get them corrected if they are not.
There are things you can do to begin rebuilding your credit score before you talk to an IVA mortgage broker. Make sure that you are registered to vote as lenders cross-check against the electoral roll. If you have any old bank accounts or store, or card accounts that you are no longer using, it’s a good idea to cancel them. Lenders will be wary of you if you have a lot of what appear to be open credit accounts that could allow you to accrue a high level of debt.
Most important is to establish that you are able to make regular payments. There are credit cards aimed at people looking to rebuild their credit ratings. These typically have high interest rates so it’s best not to run up debt on them, but if you can prove that you are able to spend and pay off the balance each month, it will help your score. It’s best not to apply for too many products, however, as there will be a credit search when you apply. These searches show up on your credit file and too many will be seen as a red flag by lenders. There are websites that allow you to check which cards you might be eligible for without it showing up on your credit record.
Finding a mortgage lenderAll lenders carry out checks when you apply for credit, so it’s impossible to hide the fact that you have had an IVA. You, therefore, need to look for an IVA mortgage broker who specialises in lending to people with a poor credit history.
You certainly won’t be offered the best interest rate deals, but specialist bad credit mortgage brokers can help you to get the most competitive deal available in the circumstances.
Most high street banks and building societies will decline your mortgage application once they see an IVA on your file. However, there are niche lenders who specialise in these circumstances. The downside is that you’ll be asked to pay a higher interest rate or to come up with a bigger deposit.
Using an IVA mortgage broker may be a good idea as they have access to a much wider range of products than you would be able to access yourself by contacting lenders directly. They often work hand-in-hand with specialist lenders who offer products that are tailored to particular sets of circumstances. They are therefore more likely to be able to find you a deal than if you approached a high street lender. Most brokers will also be willing to offer you no-obligation advice before you begin making an application.