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”.
What's Included?
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.
Frequently Asked Questions
Does arrears mean you owe money?
Yes, being in arrears means you owe money on a debt or bill that should have already been paid according to the repayment schedule. It indicates being behind on payments. [1]
What does it mean to be paid in arrears?
Being paid in arrears means your salary payment date is scheduled after the period you are being paid for has ended. For example, January 31st pay for January work. [2]
Is being in arrears bad?
Yes, being in arrears is a negative financial situation. It can damage credit scores, lead to extra fees, interest charges and legal action if ongoing and severe. [3]
What happens if your bank account is in arrears?
If your bank account goes into arrears due to missed payments, the bank may report you to credit agencies, charge fees, close the account and initiate debt recovery. [4]
Does account in arrears affect credit score?
Yes, being in arrears will likely damage your credit score as lenders will see you as at higher risk of missing future payments on debts. [5]
How do I get my account out of arrears?
Contact your creditor or lender immediately, explain why you are behind on payments, and negotiate a repayment plan to clear arrears and get your account up to date. [6]
What does in arrears mean UK?
In the UK, being in arrears means you have missed or defaulted on a payment and now owe money relating to a previous period. [7]
What does account in arrears mean HSBC?
For HSBC, an account in arrears means loan or credit card payments have been missed or only partially paid, resulting in outstanding debt owed. [8]
What does paid in arrears mean UK?
In the UK, being paid in arrears means receiving your salary after the pay period has finished, rather than being paid in advance. [9]
What does 1 month in arrears mean?
Being 1 month in arrears means missing your scheduled payment for that month, leaving you a full monthly payment behind and owing that amount. [10]
What is the cause of arrears?
Common causes of arrears include loss of income, over-committing on credit, budgeting issues, personal problems, failed direct debits, or disputes with lenders. [11]
What does paid in arrears mean universal credit?
For Universal Credit, being paid in arrears means receiving benefit payments one month after the period it covers, rather than in advance. [12]
How long do arrears stay on credit file?
Ongoing arrears may show for up to 6 years on credit files. Paid arrears will show for shorter periods depending on when brought up to date. [13]
What is the difference between in arrear and in arrears?
In arrears is more commonly used. In arrear means the same – behind on due payments and owing money as a result. [14]
References:
- https://www.lexico.com/definition/arrears
- https://smallbusiness.co.uk/paid-arrears-meaning-2539164/
- https://www.moneysavingexpert.com/loans/debt-help-plan/#solution3
- https://www.experian.co.uk/consumer/guides/arrears.html
- https://www.moneysupermarket.com/loans/loan-arrears/
- https://www.citizensadvice.org.uk/debt-and-money/if-you-cant-pay-your-bills-on-time/check-if-you-can-set-up-a-repayment-plan/
- https://www.stepchange.org/debt-info/debt-problems/in-arrears-on-bills-or-credit-payments.aspx
- https://www.hsbc.co.uk/glossary/a/account-in-arrears/
- https://smallbusiness.co.uk/paid-arrears-meaning/
- https://www.experian.co.uk/consumer/guides/arrears.html
- https://www.nationaldebtline.org/fact-sheet-library/arrears-and-repayment-plans/
- https://www.understandinguniversalcredit.gov.uk/new-to-universal-credit/universal-credit-and-other-benefits/
- https://debtcamel.co.uk/debt-options/guide-to-statute-barred-debts/
- https://legal-dictionary.thefreedictionary.com/arrears
