Following Tuesday’s announcement by the Insolvency Service of a 12-week consultation on simplifying Individual Voluntary Arrangements (IVAs), Experian®, a leading UK credit reference agency, has launched a new guide to help indebted consumers understand the full impact of an IVA on their financial future.

Last year in England and Wales, more than 44,000 people entered into an IVA, up by more than 80% on 2005.

The new guide, which was put together with help from the Insolvency Service, explains what an IVA is, the processes involved in setting one up, and the long-term impact an IVA can have on a consumer’s credit report. The guide was developed following concerns that some consumers were opting for IVAs unaware of the full implications of choosing this way of dealing with unmanageable debt.

Jill Stevens, Director of Consumer Affairs at Experian, commented: “An IVA appears on your credit report for at least six years, so even after your IVA ends, typically after five years, you might continue to experience difficulties getting credit and other financial services because you entered into an IVA in the past. If you are granted credit, the chances are that the lender will see you as a very high-risk customer and will charge you a higher rate of interest as a result.

“While an IVA may be the best option for some people, it should only ever be considered after receiving impartial advice from a responsible organisation such as Citizens Advice, the Consumer Credit Counselling Service, National Debtline or the Insolvency Service.”

Joanna Elson, Chief Executive of the Money Advice Trust, commented: “IVAs are only appropriate for a small proportion of people and this route should only be entered into after receiving best advice from a reputable source. It is vital that people are fully advised on the costs and implications of entering into an IVA, particularly if there could be a risk to their mortgaged property.”

Martin Hagerty, Head of Retail Credit at HSBC Bank plc, commented: “HSBC has harboured concerns for some time about the level of potentially misleading advertising, encouraging borrowers to enter an IVA, when it may not be in their best interests. We fully support this Experian initiative and echo the advice for those with financial worries to take impartial advice or speak openly with their lenders as a first step. An IVA may work for some but can also have serious long-term implications for an individual's credit rating.”

Edward Simpson, Head of Public Affairs at the Finance and Leasing Association said: “We welcome this guide, which should help debtors to look for more manageable solutions to their debt problems.”

The new Credit Report Basics guide, ‘Your credit report and individual voluntary arrangements’, can be downloaded from http://www.experian.co.uk/learningzone