Arrears

What are arrears?

If you miss payments on a credit facility, your account is said to be in Arrears by the sum you haven’t paid. These can most commonly include loan repayments or utility bill payments, but any regular amount due could count.

This 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’.

Depending on the severity of the arrears they can have a varying impact on your credit rating and your subsequent ability to obtain credit. A majority of consumers have the occasional late payment in their credit history, and provided this doesn’t become more than one month in arrears, it is usually fine in the eyes of most lenders.

If you only have a couple of late payments, they should have very little impact on your credit rating. But 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 practicable.

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.


Q: How do Arrears appear on my Credit Report?

A: When looking at your payment history, Arrears will appear as missed payment markers. The first month of arrears will appear as a 1 marker and any subsequent missed payments will appear as 2,3,4, 5 or 6 respectively. Your checkmyfile Credit Report will also show you the lender reporting the arrears, along with the amount due.

They will remain on your Credit Report for six years from the date first reported.

You can see what lenders see when they check your Credit Report by using checkmyfile – with data from 4 Credit Reference Agencies, not just 1. You can try checkmyfile FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel online at any time.

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