Understanding Arrears: Types and Impact on Credit
Arrears refer to missed payments on borrowed amounts.
There are two main types of arrears: unsecured arrears and secured arrears.
Unsecured Arrears: Credit Cards, Loans, and More
Unsecured arrears include missed payments on credit cards, loans, phone bills, etc.
Some lenders may ignore unsecured arrears, while others may specifically ignore arrears on phone bills.
Secured Arrears: Mortgages and Serious Consequences
Secured arrears refer to missed payments on mortgages or secured loans and are taken more seriously by lenders.
Missed payments to a private landlord are usually considered secured arrears but do not appear on credit reports.
Assessing Arrears: How Lenders Evaluate Missed Payments
Lenders evaluate the total amount of missed payments and the worst status of an account over a certain period.
The “worst status” refers to the highest number of payments behind on an account in any given month.
These details are visible on credit reports, and guidance on how to interpret them will be provided.