What does it mean if I have an account in arrears?

Put quite simply, if you have an “account in arrears”, it means that at least one payment is overdue. You’ll know how many payments are overdue by the marker on your credit report. “Arrears” comes from an old French word meaning “towards the back”, and it refers to “falling behind” on your payments. You may have heard of people falling into arrears on things like rent. It’s the same with your accounts – it always means “this person has fallen behind”.

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How do I find out by how much my account is in arrears?

Your account is in arrears by the overdue amount. This means, for example, that if you’ve missed two payments, the arrears will be the sum of the two payments you haven’t yet paid. If you pay this amount, you will be back in the black.

If you frequently have accounts in arrears, then lenders will see you as less reliable. This is because you have made a reputation of paying late. Lenders need to know that they’re going to make a good return on their investment. Remember: Lenders lend money to make money.

If you can’t pay consistently, then you present a danger to a lender’s business. Lenders would rather go with someone reliable than with someone who is more difficult to trust.

What are the risks?

If you’re in arrears on one account for more than three months, then you’re in danger of it becoming a default. A default means that the bank has marked your account as being in arrears for a long time. Lenders see arrears as suspicious. They see a default as as bad credit. If you’re looking to borrow money, avoid a default at all costs!

As with many bad credit records, arrears remain on your account for six years before they drop off.

Credibble offers two fabulous solutions.

If you’re preparing to take a mortgage, never apply until you’ve tried our unique and FREE Credibble Home app. Our smart technology will tell you what you need to fix so you avoid rejection. The app predicts when you will be able to buy, for how much and tracks your month-by-month progress to mortgage success. We’ve even added your own mortgage broker, so you get the best deals available.

More focused on your credit rating? Well, get started for free with Credibble’s 24- Factor Credit Check to truly help you improve your creditworthiness and how lenders view you. (Remember: lenders don’t use your credit score! We’ll show you what lenders look for and how to get your credit report in the best shape possible).

Last updated by Robert Edwards, May 2022