One thing that people often think about when it comes to deciding what the best option is for tackling debt is how their credit rating will be affected. Bankruptcy has drastic, long-term effects on credit rating, but what about IVAs?
Many IVA specialists will give you long-winded answers as to how your credit rating will be impacted, but the short of it is that your credit rating will be affected, but by no means as severely as it would after being declared bankrupt.
However, the impact on your credit rating due to entering an IVA could be far less than if you continue to let your debts spiral out of control, until you finally have no other option but to file for bankruptcy.
IVAs are generally entered into for terms of no more than 5 years. When the 5 years is up, the outstanding balance will have either been paid off or will be written off by debtors. The fact that you entered an IVA will usually appear on your credit history for a maximum of six years, making it more difficult or more costly to obtain credit during this time.
However, if you manage to meet your monthly IVA payments on time, you will actually be repairing any damage that appears on your credit history. Because you have shown that you are capable of keeping up with payments could be beneficial in the long term.
Upon completion of the IVA, the insolvency practitioner will present you with a Certificate of Completion. This will be sent to the relevant credit reference agencies and will be updated on your records to show that your financial problems have been resolved or satisfied. By this point, if no other debts have been accumulated, you will be given a clean bill of financial health.
