What Happens When You Miss a Payment?

Posted by Kiah Phillips in Dealing with Debt on 6 July 2018

Late payments are a common entry on Credit Reports and can occur against all credit agreements – everything from mortgages to store cards. Unless you have a Direct Debit set up to make repayments automatically each month, you’re reliant on remembering to physically make your repayments each month and inevitably, mistakes happen.

When you do realise that you’re late in paying a bill, it’s often accompanied with a vague sense of dread about what the implications actually are. Whilst a single late payment isn’t generally something to worry too much about, the problem can quickly snowball if you don’t take action.

So what happens when you miss a payment?

A day after a payment is due

If full payment is not received by a lender by their specified deadline, it will become classified as a “late payment” even if it is technically only a couple of hours past-due – a line has to be drawn somewhere after all. This will eventually appear as a marker on your Credit Report, but it can take a month before it is reported by Credit Reference Agencies and so is unlikely to actually appear on your report (and be visible to other lenders) until then.

A late payment is the least severe negative payment marker you can have on your credit file, and it’s unlikely that you’ll be turned down for credit by lenders as a result of having a single late payment marker, assuming everything else on your Credit Report is in good shape. This marker appears as a '1' within the specific credit account on your Credit Report, simply signifying one missed payment.

While most lenders will see a single late payment as not much more than human error, several late payments in a row are likely to be seen as an emerging trend by potential lenders, which may give them cause for concern.

If possible, it’s always recommended to get repayments up-to-date as soon as possible to minimise the effect on your Credit Report.

A month after missing a payment

Around one month after the payment has been missed or is late the entry will be sent to the Credit Reference Agencies and be recorded on your Credit Report.

If a missed payment is late by more than a month, it is classified as being in arrears. Arrears are more serious than a late payment, and as such are more likely to affect your ability to get credit.

In addition to the 1 on your report, a 2 will follow, signifying a second month of arrears.

From this point, any further months without payment will be reported in the same manner, all the way up to 6, with each additionally entry having an increasingly negative impact. This information will continue to be visible to any potential lenders and will severely reduce the chances of being accepted. Even where you are accepted for credit, the presence of arrears is likely to mean that you are asked to pay a higher rate of interest. You could even find that the lender suffering the late payments makes changes to the terms of your agreement, for example by reducing your credit limit or increasing the interest rate for your account.

A couple of months later

Once your account is deemed to have entered into arrears, lenders will start the process of issuing you with a Notice of Default, which gives you 14 days to pay the amount owed or have a default placed on your Credit Report. The time before a lender issues a default may vary, but most choose to do so after a period of 3-6 months.

Defaults are one of the most severe markers that can appear on your report, and can seriously harm your ability to take out credit. They appear on your report as a D marker and will remain there for six years from the date the account was officially defaulted and closed.

When a default is issued the credit agreement ends and your role changes from being a customer to being a debtor in the eyes of a lender. In many cases, the debt is sold to a third party which may well appear as a new ‘account’ based around any agreed repayment plan.

A couple of years after

If you have not paid the amount owed even after a Default has been issued, the lender has the right to petition for a County Court to issue you with a CCJ.

The lender has six years from the date of default to request a CCJ - after this time it becomes Statute Barred, which means it is no longer enforceable through the courts. That does not mean the debt no longer exists, and the lender is still legally able to pursue the debt through other means.

Six years later

Six years after the date of the first missed payment, you will notice the late payment marker drop off your Credit Report, however if you have accumulated arrears, defaults and CCJs as a result of this missed payment, you will still find it more difficult to take out credit until those markers have dropped off as well.

All other subsequent markers will also be removed six years from the date they first appeared, at which point they will no longer affect your Credit Rating.

To check for negative markers on your report, or to see what outstanding debt amounts lenders think you owe, your Credit Report should be your first port of call. If you haven’t already, you can try checkmyfile FREE for 30 days, then for £14.99 a month afterwards, which you can cancel at any time online. You’ll get complete access to the UK’s most detailed credit report, with information from four Credit Reference Agencies, not just one along with the support of our professionally-qualified Credit Analysts.

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