Restoring Credit After Iva Or Trust Deed?

IVAs and Trust Deeds are similar. A Trust Deed applies to Scotland. Other parts of the UK can use an Individual Voluntary Arrangement (IVA), which works very similar. Both products are there to help people struggling to manage debt, to get their personal finances back on track. That’s a good thing. But it comes at a cost.

Even after being discharged from these types of debt management plans, and the defaults have been dropped, you’re left with a new problem. You’ve accomplished the impossible – lived for six years without obtaining credit. The result is a blank credit history. You’re essentially too clean to be considered for mainstream financial products.

You need to take on credit. Yes, the one thing that brought the trouble to your doorstep, the credit world demands that you expose yourself to that risk again. It’s not pleasant when you’ve went through the proper channels to address debt mismanagement in the past and likely now swear blind you will never get into that predicament again.

The reality is you won’t get far without a credit history. It affects more than your mortgage because even getting a mobile phone contract requires you to pass a credit reference check.

After being discharged from an IVA or Trust Deed, you need to build credit.

The quickest place to start is with a small monthly contract, a tenner a month for a mobile phone for 12-months. Not a Sky TV subscription maxed out with multi-room, movies and sports package, phone and broadband over 24-months.

Some Sensible Credit Building Tips to Keep Your Clean History Good

Be sensible with the debts you take on

When you’re building your credit history, you want to make it obvious that you’re borrowing responsibly. That’s pretty much the only thing you have in your control. You’re in charge of what contracts you agree to and the terms, and the interest rates you accept.

Pay attention to every detail and take credit for things you need and not what you want

Need a car? Get HP if it makes sense.
Need a phone? Get a guarantor for a cheap contract phone.
Need a break? Save up for it and don’t put a £2,500 family holiday on credit.

And definitely stay clear of pay day loans.

The most responsible thing you can do is take the money you’d be paying every month towards your IVA or Trust Deed and continue paying the same amount or close to it into a savings account or Credit Union account. Don’t take out new credit just because you can.

Use your utility providers to start building credit

What’s interesting here is that you don’t even need credit just to build your credit profile.

Martin Lewis of MoneySavingExpert.com went on the hunt to find out what financial customer data is provided by utility firms to credit reference agencies.

Going by that data, we can see that…

British Gas shares customer payment information with Call Credit and Experian, as does Scottish Power. However, SSE will only share details when you miss your payments so having that company provide your energy will not build your credit history as it only reports when you default. In that respect, it’ll contribute to building a negative credit profile. EDF Energy doesn’t share information at all so they’re no good for your credit files.

It’s worth adding here that it doesn’t state what plans customers are on, because it’s likely that if you’re on a PAYG meter rather than a running meter, your information won’t be shared because the provider is not extending credit to you, usually because of a poor credit history.

For your water provider (if applicable), Anglian Water will share your account data with Experian, whereas Thames Water shares their information about you with Equifax but like SSE for energy, they only update Equifax when you default. So, if you want your account data updated to your credit reports, Anglian Water is the water provider to choose.

For your Broadband and Home phone line, BT shares information with Equifax and Virgin Media will share your information with Equifax with some information being shared with Experian. Sky and PlusNet do not share data, which brings us back to another reason not to contract with Sky to build your credit profile. It will not work and since it’s not a necessity to get through life, it’s a bill that you do not need. Always remember that good money management is to spend responsibly.

Disassociation of people you were financially linked with

In addition to your own data, any credit agreements you’ve entered into previously as a joint account holder or perhaps a guarantor financially links to you to the other person. It’s the same if you’ve lived with someone at the same address. If they have a poor credit history, it could affect you.

You can disassociate a person from your credit files by using a Notice of Dissociation. This needs to be done with each of the three credit reference agencies.

Details about the process and the forms to use are linked to below for each:

CallCredit Disassociation Information
Equifax Disassociation information

This should be done with all three credit reporting agencies as any creditor you approach could use any or all of them to check your financial background.

Credit building credit cards and prepaid credit cards can help

When you hear that you need to build credit, the first reaction is usually ah, I’ll apply for a credit card. That’s not wise because there are so many different types. For those exiting an IVA or Trust Deed, there’s little to no credit history information on file, so you’re going to have the majority of your applications for mainstream credit cards declined.

The type of credit card you need is either a prepaid card, or a credit building credit card. For information on the two and to find out if they’d be beneficial, you can check the information from Uswitch.com about them.

If you click that link, scroll down to go past all the offers because they’ve buried the information below those.

One other thing to note is to space out all credit applications. Try to stick to one application every six months to avoid appearing as if you need money. When there are too many applications close together, it can look to lenders that you need to borrow from Peter to pay Paul.

Don’t go there again by borrowing responsibly and use the companies who share your account information with credit reference agencies so you can get your credit built with no additional cost to yourself because you’re already paying for services you need.

If any service agreement or consumer contract has you getting goods or services before you pay in full for it, it’s on finance. Ask the company if they share customer payment information with credit reference agencies. If they do, find out which one. Ideally, you want your account data to be shared with Experian and Equifax. Chances are it’ll be one or the other, or it’ll be CallCredit, in which case, it won’t be much good at helping you get a homeowner loan approved as mortgage firms tend to use Experian and Equifax more than CallCredit.

Related Reading:

Trust Deed and Its Impact on Your Credit File

Navigating the financial landscape of the UK, especially when you have had debt solutions like Trust Deeds or IVAs in your past, can be challenging. The complex relationship between these debt solutions and your credit profile often leaves many wondering about the implications and recovery process.

Trust Deed Vs. IVA: Understanding the Basics

A trust deed and an IVA (Individual Voluntary Arrangement) both cater to those grappling with debts. However, their structures and implications differ:

Trust Deed: Specifically a Scottish solution, a trust deed is an agreement between you and your creditors to repay a portion of your debts over a set period, typically four years. After this period, the remaining debt is usually written off.
IVA: This is a UK-wide solution similar to the trust deed, but its terms can vary. Like the trust deed, the IVA allows debtors to repay a portion of their debt, usually over five to six years, and the remaining debt is then written off.

A frequent point of confusion is the distinction between these two. Many ask, “Is a trust deed an IVA?” The answer is no. While they both serve a similar purpose, the trust deed is specific to Scotland (hence terms like ‘Scottish trust deed’ or ‘Scotland IVA’), while an IVA is available across the UK.

Implications on Your Credit File

Having a trust deed or IVA in your financial history will undoubtedly affect your credit standing:

Duration: A common query is, “How long does a trust deed stay on your credit file?” The answer is six years, starting from the date it began. This duration is the same for an IVA.
Credit Score Impact: Your credit score after an IVA or trust deed will likely be lower. It will be challenging during this period to secure loans or even simple financial products like credit cards. Many wonder, “Can I get a credit card with an IVA?” or search for “credit card for IVA customers”. While it’s difficult, some specialised lenders might offer products designed for those rebuilding their credit. But tread carefully, as these often come with higher interest rates.
Removal from Credit File: Getting a trust deed removed from your credit file before the six-year mark is unlikely. The record of your IVA or trust deed is maintained to inform potential lenders of past financial challenges.
Financial Association: Another aspect to consider is the equifax financial disassociation process. If you’ve had joint financial products with someone, your credit files become linked. This linkage means their financial behaviour could affect your credit rating and vice versa. Post IVA or trust deed, you might want to consider disassociating to ensure their actions don’t affect your rebuilding process.

Can You Pass A Credit Check With An Iva?

Yes, can you pass a credit check with an iva is a common question, as a credit check is a data discovery process, not a pass or fail exercise. If you are looking for a cheap house in Manchester you may be able to buy one with a mortgage.

Credit Building Post Trust Deed or IVA

After your IVA or trust deed has been discharged and is off your credit report, it’s crucial to focus on credit building in the UK. Credit building ensures that you improve your financial standing, opening doors to better financial products and rates in the future. Simple measures, such as paying bills on time, not maxing out your credit cards, and not applying for multiple credit lines at once, can be beneficial. There are also specific “credit card for IVA” or “credit cards for IVA” individuals which can assist in this rebuilding process.

Mortgage After Trust Deed or IVA

A significant concern for many is the possibility of securing a mortgage after trust deed or IVA. While it’s challenging to get a mortgage immediately after your debt solution concludes, it’s not impossible as time goes on. Lenders will assess the risk involved, considering how long ago the IVA or trust deed was discharged and your credit behaviour since then.

Remember, seeking a mortgage after an IVA or a trust deed requires diligent preparation. Building a larger deposit, maintaining a clean credit record post-discharge, and seeking advice from financial experts like Martin Lewis on IVA-related matters can aid in the process.

Navigating your financial future post trust deed or IVA is a journey of patience and informed decision-making. Being aware of resources and strategies can aid in the rebuilding process. Moreover, understanding related topics, like the role of raac in schools, can provide an expanded perspective on finance and education. With time and dedication, achieving a sound financial future is possible.