Debt solutions and your credit file

An individual voluntary arrangement (IVA) does affect your credit score, and the effect lasts a long time. An IVA is recorded on your credit file for six years from the date it begins, and during that time it is harder to open new bank accounts, get loans or buy on credit¹. Most IVAs last five or six years, so for many people the entry sits on their file for almost the whole arrangement³. Once the IVA completes, any remaining unsecured debt included in it is written off, but the record of the arrangement itself outlives the debt³.

The six years run from the start of the IVA, not the end. If the IVA lasts longer than six years, it stays on your credit file until the date the IVA ends⁴. Paying the IVA off early does not remove it sooner: the entry remains for the full six years from approval⁵. Alongside the IVA itself, the defaults on your existing debts also affect your file, so the practical impact on borrowing can be wider than the IVA entry alone⁶.

How each debt solution is recorded, and for how long, differs between England, Wales, Scotland and Northern Ireland. This page sets out what happens to your credit file under each of the main options, what you can and cannot borrow while a solution is running, and where to get free advice before choosing one. For how each solution works in detail, see the debt section.

An IVA lowers your credit score and stays for six years

An IVA is a legally binding agreement with your creditors, and it becomes binding if creditors holding at least 75 per cent of the value of the debt that votes accept your proposal¹¹. Once it is approved, all interest and charges on the included debts are frozen, and your creditors should stop chasing you for payment³. In exchange, the arrangement itself is recorded on your credit reference file for six years, and it can affect your ability to get further credit throughout that period⁴.

The six years start from the date the IVA begins, not from when it finishes¹. Because most IVAs run five or six years³, a five year IVA leaves roughly a year of the credit file entry running after the arrangement has completed. A six year IVA ends at about the same time as the entry. If your IVA is extended, for example because you are a homeowner with equity in your property, and it lasts longer than six years, the entry remains on your file until the date the IVA ends⁴.

Two things sit on your file at once. The IVA itself is one entry, and the defaults recorded on your existing debts are another⁶. A default is a marker a lender places on an account that has fallen badly behind; the guide to defaults and default notices explains how those work and how long they last. So even after the IVA entry drops off, the record of the problems that led to it may have its own timeline.

Paying the IVA off early does not shorten the six years. The IVA stays on your credit report for six years from the date it was approved, whatever happens afterwards⁵. Early settlement can also carry risks of its own, which the section on rebuilding your credit covers below.

The Insolvency Register: public while the IVA lasts

As well as your credit file, an IVA is recorded in a public register. Your IVA is listed on the Individual Insolvency Register, an online database that credit reference agencies use to update your credit rating². The register shows details such as your name, date of birth and address, though the address may be withheld if you are at risk of violence¹³. The IVA register is part of the Insolvency register, a public record maintained by the Insolvency Service¹⁴.

The timing is worth knowing. Your IVA is added to the online public register for the duration of the IVA, and it is removed three months after the IVA has ended⁹. So the public listing and the credit file entry do not run on quite the same clock: the credit file entry normally lasts six years from the start, while the register entry lasts as long as the IVA does, plus three months.

Because the register is public, anyone can search it: a lender, an employer, a letting agent, or a member of the public. That is a real difference from informal solutions. A debt management plan, by contrast, is completely confidential, and no one has to know you are on one¹⁰. The trade off is that an IVA binds your creditors once it is approved, while a debt management plan depends on creditors agreeing to it, and they do not have to¹⁷.

The Insolvency Register is not the only public record that can affect you. The guide to the Individual Insolvency Register explains what it shows and how long entries stay, and the Register of Judgments, Orders and Fines covers the separate register used for county court judgments.

Bankruptcy: six years on the file, and a disputed Scottish figure

Bankruptcy has a big impact on your credit score and stays on your credit file for six years⁸. As with an IVA, the six years run from the date the bankruptcy begins¹⁸. During that time, loans you are offered will likely have a higher interest rate⁸. Discharge from the debts usually happens much sooner, typically 12 months after the bankruptcy order is granted, but the credit file entry outlasts the discharge¹⁹.

In Scotland, bankruptcy is usually called sequestration, and the Accountant in Bankruptcy's own guidance states that it will stay on your credit file for six years⁸. Some independent guidance gives a different figure for Scotland: StepChange's information for homeowners lists bankruptcy as lasting five years in Scotland²⁰, while its sequestration page says six years²¹, as does National Debtline²². The guide to credit files in Scotland covers the Scottish registers in more detail.

Bankruptcy also restricts borrowing while it lasts. In England and Wales, you cannot borrow more than £500 without telling the lender you are bankrupt²³. In Scotland, the guidance conflicts: one source says you cannot take out credit of more than £2,000 unless you tell the creditor about your status, while another says you cannot take out credit of any amount if you have debts of at least £1,000 at the time. Both figures are stated in independent guidance and neither has been resolved, so treat the stricter reading as the safer assumption and check with an adviser.

A creditor owed £5,000 or more can apply to the court to have you declared bankrupt in England and Wales¹⁹. Bankruptcy is a formal method of dealing with debt when all other repayment options have failed²⁴. If a bankruptcy is later annulled, the people you owe are told and can start contacting you again for payment, unless you set up an IVA²⁵.

Borrowing during a debt solution: the £500 limit

While an IVA is running, there is a hard limit on new credit. You cannot take out any new credit over £500 without written permission from your insolvency practitioner⁷. The same £500 threshold is stated across the main guidance sources: you must get your IP's permission to borrow more than £500 while on an IVA²⁶.

Taking out credit without checking with your IVA provider is a breach of your IVA terms, and it could make your IVA fail²⁶. An IVA is a legally binding agreement, and failure could result in a petition for bankruptcy³. So the £500 rule is not a soft guideline: it is one of the conditions of the arrangement, and breaking it puts the whole solution at risk.

The £500 figure also appears in the IVA's rules on windfalls. If you benefit from an "after acquired asset" during your IVA, meaning an asset, windfall or inheritance above £500, you may have to pay it into the arrangement²⁷. The threshold for entering an IVA is different again: under the IVA Protocol criteria you will generally have debts with a combined value of more than £7,000²⁸, though Advice NI notes an IVA is not advised if your debts total less than £8,000²⁹.

Bankruptcy's borrowing limit is stricter in form: in England and Wales you cannot borrow more than £500 without telling the lender you are bankrupt²³. A debt management plan has no statutory borrowing limit, but taking on new credit while repaying old debts under a revised arrangement is usually discouraged, and any new borrowing will be visible on your credit file alongside the arrangement markers. The guide to arrangement to pay markers explains how reduced payment arrangements are recorded.

Mortgages after an IVA or bankruptcy

A mortgage is a secured debt, and an IVA does not affect secured debts without the consent of the secured creditor¹¹. If you already have a mortgage when you enter an IVA, the mortgage itself is not brought into the arrangement, though you must keep up the payments. If you are a homeowner, in many cases an IVA may allow you to keep your home, but the agreement may involve your creditors taking a share of any equity you have in the property³⁰. Where there is a larger amount of equity, creditors will generally ask you to remortgage your house when your IVA reaches 4.5 years³¹.

Getting a new mortgage after an IVA is harder, but not impossible. Some lenders will refuse any applicant who has ever had an IVA; others may only lend once the IVA has disappeared from your credit report after six years³². Between those positions, there are lenders willing to consider applicants if the IVA is at least three years old, fully settled, and the credit history has been rebuilt with all payments kept up³². Once six years have passed and the IVA has dropped off, a mortgage with a smaller deposit, of 5 per cent or 10 per cent, may be possible³².

After bankruptcy, the same six year credit file entry applies, and lenders who might consider you will want to see a rebuilt history since discharge. The guide to rebuilding your credit after bankruptcy, an IVA or a DRO covers the practical steps, and how lenders decide whether to accept you explains what a mortgage lender actually looks at.

Rebuilding your credit once a debt solution ends

When an IVA completes, you are released from the debts you owed before it began, and any unpaid balance is written off¹¹. Any remaining debt is written off when the IVA is completed³³, and your debts are written off after you successfully complete the arrangement³⁴. That is the point at which rebuilding starts: the debts are gone, but the IVA entry and the defaults behind it are still on the file until their own time limits expire.

The arithmetic of an IVA explains why the file matters so much afterwards. On an example of £25,000 of debt with £200 a month affordable, you would pay back £12,000 in total over sixty months, which includes the insolvency practitioner's fee³⁵. What you pay towards your debts can be less than what you pay into the IVA overall, because nominee fees and supervisor fees come out of your monthly payments³⁶. Any fees have to be approved by creditors³⁷.

Two things can undo the write off. If the IVA fails or is cancelled, you must repay your outstanding debts plus any interest that has built up while the IVA was active, and creditors are no longer restricted from contacting you or taking recovery action³⁸. If you try to settle early outside the agreed terms, creditors may restart interest and charges, including for the period the IVA was in place, and the amount you paid may not reduce the debt as much as you expect, because some of it covered IP fees; creditors can take recovery action and, in rare cases, apply to make you bankrupt¹³.

Rebuilding is a slow process of showing a clean, sustained record after the solution ends. The guides to how to improve your credit score, building a credit history and how long information stays on your credit file set out what helps and on what timescale.

Free debt advice before you choose

Every major guidance source points the same way: free, independent debt advice comes before any choice of solution. Free debt advice is required before applying for an IVA³⁹, and free independent advice is recommended before selecting one, because companies can sell IVAs that are more expensive than they need to be⁴⁰. The same applies to debt management plans: advice is available before setting up a plan with a provider, and free, independent advice is available from organisations such as Advice NI¹⁷.

The main options differ in what they cost and what they risk:

A debt management plan is an agreement between you and your creditors to make a set monthly payment, based on what you can afford, distributed fairly between all your creditors¹⁷. It can only be used for unsecured debts, and your debts must be repaid in full: they will not be written off¹⁷. Creditors do not have to enter the plan, and can still contact you or take you to court, though they may agree to freeze interest and charges and stop other action¹⁷. Some companies charge a fee for a debt management plan, while others, such as the StepChange Debt Charity, give their services for free¹⁷. The debt section explains each solution in full.

Everyday questions: jobs, renting and partners

Jobs. Some employers might run the type of credit check that shows an IVA, but most do not, and by law employers should ask before running a credit check⁴¹. Your employer can only find out about your IVA through financial checks approved in advance, or by searching the public Insolvency Register, which is rare⁴¹. Certain jobs can be affected: roles in finance, law, property and accountancy⁷. Losing your job does not automatically cause the IVA to fail, but IVA providers ask to be told so the arrangement can be reviewed⁴¹. The guide to poor credit and jobs covers this in detail.

Renting. An IVA should have no effect on a home you rent, and it is very unlikely you would need to move¹⁸. But an IVA will not stop your landlord taking action to evict you over rent arrears, so it is best to pay mortgage or rent arrears separately from your IVA¹². When applying for a new tenancy, a letting agent may run a credit check; the guides to renting with a poor credit history and tenant credit checks explain what agents see and what you can do.

Partners. Your partner's poor credit does not always affect you, even if you are married or in a civil partnership. It matters only if you have a joint account, loan or credit card with them, which creates a financial association on your files⁴². The guide to financial associations explains how these work and how to remove one that is no longer accurate.

Citizenship. Your IVA will appear on the Insolvency Register, which may be visible during a citizenship assessment, but it does not automatically prevent approval³.

If you are struggling with debt, free and independent help is available from StepChange, National Debtline, Citizens Advice and, in Northern Ireland, Advice NI, before you commit to any solution.