What are CCJs and IVAs?
When it comes to financial agreements, having a CCJ or an IVA can make it challenging to find lenders willing to offer you a deal and this also includes car finance. But let’s look more in detail at what CCJs and IVAs are.
What is a CCJ?
A County Court Judgement (CCJ) is a type of Judgement that can be issued against you in England, Wales or Northern Ireland if you fail to pay back any debt that you owe. You will generally be aware if a CCJ has been filed against you as debtors will first issue you with a warning letter stating that you need to pay them back an X amount or they will pursue legal action. If you cannot afford to pay them back, a Judgement will be filed against you, stating a deadline for repayments, outlining how much you owe and how you will pay it back.
How Does a CCJ Affect a Car Finance Application?
CCJs remain on your credit file for six years even after they’ve been paid off, making it more challenging to get car finance as they can negatively impact your chances of getting approved for financial agreements. However, having a poor credit score due to a CCJ doesn’t necessarily rule you out for car finance, but it may lead to higher premiums than you would get when applying for the same agreement on a good credit score.
How Do I Lessen the Impact of a CCJ?
There are several things you could do to make your CCJ have less impact on your credit report; this includes:
- Talking to credit agencies such as Experian or Clear Score to see if they can offer suggestions and advice to lessen the impact of your CCJ.
- Paying the money you owe within one month of the CCJ being issued to you – this will remove the CCJ from the register entirely.
- Disputing your CCJ if you can prove in a court of law that you shouldn’t be issued with one
- If your CCJ is still on file after six years and an insurance company was responsible for your debt, you can contact a credit agency and ask them to remove it from your file.
- Following simple steps to improve your credit score, such as making sure you are on the electoral roll, correcting any incorrect information on your credit report and paying your bills on time.
Once you’ve managed to repay the CCJ, you will need to show proof of payment to the court to get your record changed to “satisfied”. You should remember though that regardless of when you pay, a CCJ will still stay on file for six years, even after being marked as “satisfied”.
What is an IVA?
An Individual Voluntary Agreement (IVA) is a legally binding agreement you make with your creditors to ensure that you are able to pay back your debts over a pre-agreed period of time; this is usually a solution for anyone considered incapable of making their debts to their creditors. An IVA involves a formal agreement between you and an insolvency practitioner (IP) to define the terms in which you will repay your debts. When entering an IVA, your IP will negotiate with the companies you owe money to and, rather than paying individual creditors, you will make the payments directly to your IP, who will then pay individual creditors.
How Does an IVA Affect a Car Finance Application?
An IVA, just like a CCJ, may make it difficult to be accepted for car finance due to the conditions of your agreement and you should always seek permission from your Insolvency Practitioner should you wish to apply for car finance. Remember, an IVA will appear on your credit file and affect your score for up to six years. However, this doesn’t mean that you can’t seek car finance; it just means that you may find it more challenging and potentially pay higher premiums than a person with a good credit score.
Should I Apply for Car Finance Once My IVA has Ended?
The decision is entirely up to you. However, should you want to wait until your IVA term is up, it’s worth remembering that the IVA will remain on the insolvency register for around three months after its term is up and remain on your credit file for six years after it has ended. So, applying for car finance may still prove to be challenging, but if you start rebuilding your credit score right away once the term is up, your creditors will consider your individual situation and see whether you can be offered a car financing agreement.
We hope that our article has helped you understand what CCJs and IVAs are, and if you have been affected by one or the other, but would like to apply for car finance, come to speak to us at your nearest Perrys and we’ll see how we can help you.