How some financial moves are not without consequence
1st July 2010
As we emerge from the first recession of the 21st-century, a lot of us have had to make difficult decisions concerning our financial situation. As you may or may not know, every move which concerns credit is usually reflected in the credit reports which are held exclusively by three credit referencing agencies, or CRAs, in the UK. From here, this data is passed onto lenders as and when it is required. In this article, we are going to look at how seeking financial aid can affect your chances of getting the credit you need.
You might have become familiar with the term ‘IVA’. It’s an abbreviation for an Individual Voluntary Agreement, and it has become a familiar method for addressing debt in the UK. This document is legally binding because of how it means creditors need to join you in making a decision to consolidate your debt into smaller payments over a period of time, reducing the duration of time you have to wait until your debt is written off. It could be said that many people find this option to be idyllic – however, it can be far from this as it can cause your credit report to be ‘marked’, as it were.
Your IVA will appear on your records for a total of six years, with other decisions to prevent you from bankruptcy such as repossessing your home to keep up with repayments also being documented on your report. It can be upsetting to think of the effects that this might have on your financial future, but considering this is only a matter for the credit referencing agencies over a few years, you can find that you will have a brighter future once you are back on your feet and time has passed on from your difficulty.
There have been some myths surrounding credit reports that a person can become ‘blacklisted’ as it were – with their report placed into a unique section that warns lenders of the past that these borrowers have had. On the contrary, CRAs such as Experian have strenuously denied that this is the case, and emphasize that there is no such thing. A file will only be provided to the lenders that need it as and when it is required to make a credit check.
It could be said that the limitations that an IVA has on your credit rating are rather irrelevant, as you are not entitled to be a borrower during such a period anyway. If you fit into the average duration of such an agreement, five years, you could find that the limitations really only impede on your financial capabilities for a year or so after the agreement expires.
Mortgages are not out of your reach – even if you have a poor credit rating and restrictions which are placed on you because of the IVA that you have. A lot of the time, you will be entitled to take out a new agreement at the behest of higher interest rates.
Posted in Credit rating