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26.02.2018

Can I get a Mortgage after an IVA?

One common concern among people with or considering IVAs is how the scheme could affect their chances of getting a mortgage.

Having an IVA will have a negative impact on your ability to access credit – but so does having problem debt! Despite this, it is entirely possible to get a mortgage after your IVA has finished.

Credit Files

The main reason that getting a mortgage following an IVA can be challenging is that a record of it will remain on your credit file for a while.

Your credit file is used by lenders to try and predict how likely you are to be able to repay what you borrow based on your history, so having an IVA lets them know that you have had trouble paying back debt in the past.

Credit files contain six years’ worth of credit history. This means that a typical IVA will be visible on your file for around a year after its completion.

For this reason, it is a good idea to wait until the IVA has dropped off your credit file before applying for a mortgage.

You can check this by requesting a copy of your credit file from one of the UK’s credit reference agencies – Experian, Equifax, or Callcredit. It usually costs around £2 for a one-off request.

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Improve your Credit Rating

The best way to secure a mortgage following an IVA is to rebuild your credit score. This will show potential lenders that you are able to repay what you borrow, hence will be able to keep up with your mortgage payments.

The process can seem long, but it is definitely worth taking the time to rebuild your credit score, to ensure you get the best possible deal on a mortgage. There are plenty of ways to rebuild your credit score after an IVA:

  • Get a Completion Certificate

The first thing you should do to rebuild your credit score after an IVA is to request a certificate of completion from your Insolvency Practitioner (IP).

This proves that your  Individual Voluntary Arrangement has been successfully completed and ensures you have evidence of this to hand.

  • Check your Details

Making sure that your details are up to date can have a surprisingly positive impact on your credit score. Registering on the electoral roll ensures that lenders know you have a stable address, which can make a big difference, and you should also check that all the details on your file are correct.

  • Pay Bills on time

Simple as it sounds, paying bills on time does gradually build up a history of consistent payments. Setting up direct debits can be the best way to do this.

You could also consider switching providers to ensure you are getting the cheapest deal, making it a little easier to pay each month.

  • Consider a Credit-builder Card

Some credit card providers offer cards specifically designed for people with lower credit scores hoping to improve them.

These cards tend to have higher interest rates than standard cards (around 30% APR), but can be a good stepping stone towards being granted better value credit.

If you do decide to rebuild your credit in this way, be careful to pay your balance in full each month and use it sparingly, at least at first.

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Finding a Suitable Mortgage

If you are concerned about your credit file, you may wish to seek advice from a professional mortgage broker rather than only approaching the high-street banks.

They will be able to give you the best advice based on your individual circumstances.

Getting a mortgage is one of the biggest financial commitments most of us will make in our lifetimes, so it is important to take some time to consider your options.

It might be tempting to try and jump on the property ladder as soon as your IVA is completed, but in the long-term you are likely to get a better deal by taking a few years to rebuild your credit score and save for a deposit.

IVAs do make it more challenging to get a mortgage, but dealing with unmanageable debt should be your first priority, so if you think an IVA is the right solution for you, try not to let worries about getting a mortgage put you off getting help with your debts.

It may take longer, but having an IVA will certainly not stop you from getting a mortgage.

If you are still not sure whether an IVA is the right solution for you, you can learn more here. Alternatively, have a chat about your options with one of Creditfix’s friendly advisors by calling 0808 2085 198.