The term IVA, or Individual Voluntary Arrangement, refers to a legally binding agreement between an individual and their creditors in satisfaction of their debts, or in some cases, part of their debts. Like many financial solutions, individuals will often be reluctant to seek an IVA for fear of its long-term implications.
This fear stems from the belief that such a “black mark” will never leave an individual’s credit history, which could prevent property purchase and affect other important financial decisions.
Bad Credit Perceptions
Concerns surrounding the effects of an IVA can be the result of misunderstanding or a lack of awareness regarding the long-term implications. A recent study sought to shed some light on the public’s understanding of the effects of IVAs and other formal and informal personal insolvency solutions.
The study was based on a piece of research that asked 500 members of the public how long they thought specific black marks remained on their credit history. The results were quite surprising.
To elaborate, respondents were asked a number of questions regarding black marks on their credit score and how they thought it might affect them. The results showed that 73% of those asked did not understand how long black marks are remembered on a credit report.
Establishing the Facts
One of the questions focused on Individual Voluntary Arrangements. An IVA stays on your credit file for exactly 6 years from the day it starts. Most IVAs last 5 years, essentially meaning it will only stay on your credit report for 12 months after it ends. Of those asked, 69% thought an IVA lasts longer than it actually does, with 20% of respondents thinking an IVA takes 15 years to be forgotten.
The message here is that black marks on your credit score are not as bad as you might think. Six years is a long time, but if you are in financial difficulty and need the support of an IVA, it really isn’t the end of the world, and let’s face it, your credit score will most likely be in a negative state anyway.
If you would like to discuss any matters regarding insolvency or personal finance, get in touch with the Parker Andrews team today. You can call us on 0800 612 7593 or use our contact form.