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On your Credit Report, Arrears are consecutive missed payments of two months or more. ‘In Arrears’ is often the status that precedes a default notice, which will itself be issued by the lender if they believe they have little chance of reclaiming the owed amount.

If you miss payments on a credit account, it is said to be in Arrears by the sum you haven’t paid. Arrears can be expressed by the amount owed, or by the number of months’ payment you have missed, for example ‘£50 in Arrears’ or ‘3 months in Arrears’.

How do I see if I’m in Arrears?

Arrears can appear on your Credit Report marked with ‘2’, ‘3’, ‘4’, ‘5’, or ‘6’ representing the number of months that the account is in Arrears. This makes it easy to check which accounts are paid up-to-date and which accounts are behind on payment.

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How do Arrears impact my Credit Rating?

Depending on the severity of the Arrears, they can have a varying impact on your Credit Rating and your subsequent ability to obtain credit. The occasional late payment is common in most credit histories and lenders expect to see these - provided a single late payment doesn’t become more than one month in Arrears, the negative impact is usually minimal. This will, however, depend on your lender’s specific attitude and lending criteria.

Payments which are two months in Arrears will have a noticeable impact on your Credit Rating and any payments later than this will be regarded as serious arrears. Once an account is two months in Arrears or more, it is handled by the lender’s collection department, with the aim to get things back on track as soon as possible.

Payments in serious Arrears can often result in default and possibly further court action. At this time, collections actions would have failed, and the matter passed to the lender’s recoveries department. The aim of this department is simply to recover monies due by whatever means are deemed appropriate.

How long do Arrears stay on my Credit Report?

Arrears are recorded on your Credit Report for six years and will harm your Credit Rating for the full duration that they appear – regardless of whether the outstanding balance is paid or not. Arrears will only cease damaging your Credit Rating once they have been removed after the six years.

That said, fully paying outstanding Arrears will prevent the negative impact from worsening, especially if it prevents the lender from issuing a default.

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