Can I get a credit card if I’ve had an IVA?

During an IVA, you’re usually not allowed to borrow over £500 as part of the terms of your agreement, but you may be able to after your IVA has finished. However, your options are likely to be limited to higher interest rates, and lower credit limits so long as the IVA remains on your credit file, due to the risk involved from the lender’s point of view.

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It usually depends on how much you want to borrow. Amounts less than £500, don’t need to be approved by your Insolvency Practitioner. However, you should consider whether this is the best option for you, as borrowing more money could lead you further into debt.

An IVA is a legally binding debt solution and a form of insolvency that can be used as an alternative to bankruptcy when you can’t afford to repay the debts you already have.

You may find it difficult to borrow credit when you have an IVA because lenders are likely to see you as high risk.  

It’s important to remember that there is no guarantee that you will be accepted for credit with an IVA, even for amounts less than £500.

What credit can’t you take out?

If you want to borrow more than £500 during your IVA, you’ll need express consent from your Insolvency Practitioner first. Borrowing includes:

  • credit cards
  • personal loans
  • overdrafts
  • payday loans
  • loans from family or friends

These types of borrowing are only likely to be accepted by the Insolvency Practitioner in exceptional circumstances, such as in a financial emergency.

Borrowing more than £500 without getting consent from them first would be a serious breach of your IVA and could lead to it being terminated.

Should I wait to apply until after an IVA?

It’s usually advised that you wait for your IVA to clear from your credit report before making an application. If you make an application to borrow before your IVA has cleared from your report, lenders may be more reluctant to lend to you, which may harm your chances of being accepted and could mean that you face higher interest rates.

An IVA will stay on your credit report for six years from the date it started. Waiting until it has cleared may improve your chances of getting finance in the future, but there is still no guarantee that you’ll be accepted.

Once you’ve got to the end of your IVA, you’ll be given a certificate of completion by your Insolvency Practitioner, which you should forward on to each of the three main credit reference agencies in the UK (Experian, Equifax and TransUnion). They will then be able to update your credit history.

You can also check your credit report for free (for life) with our member-only platform, CredAbility, to see what your credit score is now that your IVA has been completed.

Remember, the impact your IVA will have on your ability to be accepted for credit will partly depend on how long ago the start date was.

If your IVA lasted for five years, then it will take a further year for the IVA to automatically drop off your credit history. If your IVA was extended and lasted six or more years, by the time it comes to an end, the IVA itself should already be off your credit report.

Once your IVA has dropped off your credit history you can start to apply for credit again. Your credit history may still be thin but there are lenders who specialise in finding loans, mortgages and credit cards for people who have struggled to manage credit in the past, or who have a thin credit history.

Remember, making multiple applications in a short space of time can damage your credit history further. You can use a QuickCheck tool to see if you are eligible for a credit card without damaging your credit history – before you apply.

Do you have to declare an IVA after six years?

Although your IVA will usually only stay on your credit report for six years, lenders can (and usually will) ask you to declare any past credit issues you’ve had, which would include an IVA.  

It’s important that you are always honest with lenders, because being dishonest could constitute fraud , and doesn’t guarantee that you will be accepted anyway!

Are there alternative solutions available?

If you are worried about being able to afford your IVA repayments alongside your monthly living costs, there may be other alternatives to getting a credit card during an IVA.

Speak to your Insolvency Practitioner (IP)

Before taking out credit or going down an alternative route, it’s always best to speak to your Insolvency Practitioner. They know your situation and so will be able to advise you on which options are available for you and help you come to the best decision for your financial situation.

If you are unable to meet your living costs and the agreed monthly repayments for your IVA, or you need a bit of extra money for an essential purchase, they may be able to negotiate with your creditors in order to reduce the size of your monthly repayments. They can also ask for a payment holiday for you, which gives you a break from your payments for a period of time. It’s important to note that if you take either of these options, your IVA will take longer to pay off.

Considering taking credit out during your IVA should not be a decision that’s taken lightly.

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