Arrears

If you miss payments on a credit facility, your account is said to be ‘in arrears’ by the sum you haven’t paid.

This can be expressed by amount of the missing payments, or by the number of months’ payment you have missed, such as ‘£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. The majority of consumers have the odd late payment, no more than one month in arrears.

If you only have two or three such payments in arrears they will have very little impact on your credit rating. But payments which are two months in arrears or worse will have a noticeable impact on your credit rating and any payments later than this will 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.

Jargon Buster

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