What are arrears?

Arrears show where you have missed more than one repayment, normally two months’ worth or more. If you miss your payments, you are ‘in arrears’ for the total amount you haven’t paid.

You will normally see them on your credit report as ‘2’, ‘3’, ‘4’, ‘5’, ‘6’, which shows how many months the account is in arrears. The number of months the account is in arrears will change the impact on your score – two months being less severe than six months. After two months, the arrears will likely be handled by the lender’s collections department.

Six months is usually how far arrears would get before a default notice. So, if you can pay what you owe within that time, it’ll mean you don’t end up with a default. However, it doesn’t matter how many months of arrears you have; they’ll stay on your report for six years and affect your score.

The good news is that your credit score can change over time; although the arrears will remain present, you can build up positive payment behaviour now by building good habits, which will benefit your credit health in the long run.