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Original poster

IVA on credit card - mortgage problems

18 replies

chasingtail · 28/09/2012 13:31

Posting as am worried about BIL's finances and hope you lovely MNers can provide some advice.

Following split with his wife he has been living with us to clear some debts and save to buy a house (in-laws are stumping up deposit).

He has an IVA on a credit card (for approx £10k) and unsurprisingly when he put in a mortgage application this has caused problems. Apparently the building society has advised once the IVA has been cleared his credit rating will improve within 6 weeks of completion and the mortgage application will be approved Hmm.

In his wisdom (& on the advice of bloke at work Hmm!) he has transferred the debt on 0% balance to a dormant credit card he has, with the intention of paying off the debt within the next 3 months. At no point has he advised the new credit card company of the existing IVA or run it passed the Building Society to clarify if this was a prudent move in terms of his mortgage application.

I guess therefore my questions are:

1: is he legally required to inform the 2nd credit card company of the outstanding IVA;
2: by just shifting the debt will this actually do anything to improve his credit rating?

OP posts:
Original poster
chasingtail · 28/09/2012 16:46

Bump

OP posts:
LadyKooKoo · 28/09/2012 20:45

I don't think he is obliged to tell them, no.

However, it won't improve his credit rating one jot. The mortgage company don't care who the debt is with, it is just the fact that he has it.

RedHelenB · 28/09/2012 21:47

IVA's work for all your debt, not just one card & are not completed until 5 years from the start in terms of mortgage applications. And yes, he will be in trouble with the IVA company for taking out more credit, I'm sure you are not supposed to even be using credit cards. Are you sure it's an IVA he's in?

5inthebed · 28/09/2012 22:00

You can't just have an iva on one credit card. An iva is for all of your debt. During the 5 years of the iva you are not permitted to obtain any credit. If you do obtain credit your iva company can take this as you breaking the rules and can make you bankrupt.

In other words, he will bein serious trouble if they find out. He has done a rather foolish thing.

And it is suggested you do not get any credit for the first year after your iva as your credit rating is virtually nil.

Original poster
chasingtail · 29/09/2012 10:30

Well thanks for your insight; I am now confused as to whether it is a true IVA he actually has. If as you say he is breaking the IVA rules by transferring the balance/taking out more credit, how on earth can the card company have agreed it??

Not sure how old the IVA is and his debt was with one card company only. His intention is now the balance has been moved, it will be cleared within 3 months.

I don't think I am getting the full picture of what is going on but clearly he is deluding himself if he thinks shifting and clearing the debt will immediately sort his credit rating if it normally takes at least a year to recover.

OP posts:
5inthebed · 29/09/2012 13:23

His bad credit will show on his credit file for 6 years, not just one after he pays it off.

Original poster
chasingtail · 29/09/2012 13:28

thanks 5 - is that 6 years from the point the IVA is completed?

OP posts:
RedHelenB · 29/09/2012 15:16

No, from the start of the IVA.

LadyKooKoo · 29/09/2012 15:16

Everything shows on your credit file for six years so yes, if the IVA were to finish in January 2013 (for example) then it would not disappear until February 2019.

5inthebed · 29/09/2012 17:08

Its from the start, so if it started jan 2010 it would come off jan 2016

Original poster
chasingtail · 29/09/2012 18:23

Ah ok...., so even if his IVA is 5 years old & he does manage to clear/complete the debt, he is still unlikely for at least another year to get a credit score high enough for a mortgage.

He says that the Building Society will give him the green flag within 6 weeks of clearing the debt, but from what everyone is saying that can't possibly be the case.

OP posts:
5inthebed · 29/09/2012 21:10

He gets a certificate at the end of the iva saying he has completed it so he may be able to get debt again, but most lenders would decline due to credit rating.

LadyKooKoo · 29/09/2012 21:58

5inthebed, sorry but that is incorrect, an entry on your credit file will remain on there for six years, the file is updated every month so for every month it is on there, it will add another month it can be viewed. I for example paid off a loan with Egg in 2007 and it is still on my report, it shows as settled but it still shows on my report as being something I had. Equifax can probably explain it better than me!

5inthebed · 29/09/2012 23:01

I was specifically talking about the iva.

keli5325 · 01/10/2012 11:42

An IVA will show on the credit file for 6years from the date of completion and any defaults added will also remain for 6 years.

How can your BIL pay his IVA and the repayments on the new credit card? if he can pay surley he shouldnt be in an IVA? Is he on a DMP?

Another thing is that he should not take out additional credit more than £500 without the prior permission of the IVA company, and may well find he is in breach of the IVA terms - this is another headache if the IVA compnay finds out which they surley will when they pay the money from the IVA to the credit card company.

They can terminate the IVA for the breach and then if they decide to make him bankrupt

MelodyPondering · 01/10/2012 12:03

It's 6 years from the START DATE!

Original poster
chasingtail · 01/10/2012 12:05

I know, I'm confused by it all as well....

My understanding is that he took an IVA when he was made redundant approx 5 years ago. He did find another job but didn't tell the IVA company as he didn't want to have to pay back any more than his fixed monthly amount Hmm.

Anyhoo, he has transferred the full amount of the IVA to another credit card (he already had although didn't use), so to his mind, the IVA is cleared and he will pay off the new balance within 3 months, ergo bright shiny credit rating!! He reckons the exisiting IVA company are fine with the transfer but he hasn't told the new card company about the IVA (as they didn't ask!!!).

I think that whichever way he looks at this, or how ever many short cuts he tries to take, his credit rating is stuffed for the forseeable future, and I can't imagine any lender being will to give him a mortage (bum, was hoping to get him out from under my roof this side of Xmas!!)

OP posts:
keli5325 · 01/10/2012 12:25

It is 6years from acceptance not completion -

He will find it nigh on impossible to find a mortgage in the current environment until the IVA falls off his credit file and the insolvency register. He will also need to clean up the defaults on his credit file if any were registered after the IVA was approved

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