What Counts as a Missed Payment vs Arrears in the UK

The terms "missed payment" and "arrears" are used frequently in UK personal finance, but they carry distinct legal and practical meanings. Understanding the difference matters because each term triggers different regulatory processes, different reporting obligations on credit files, and different rights and protections under law.

This guide explains how UK law and financial regulation define these terms, when each applies, and how they interact with credit reporting, consumer credit agreements, and mortgage lending. It covers England & Wales, Scotland, and Northern Ireland.

This guide does not provide financial advice. It explains how the system works based on published legislation, regulatory rules, and industry reporting standards.

While "missed payment" is not a defined statutory term, it is used across regulation and industry practice to describe a single instance where a payment due under a credit agreement is not made by the agreed date. Arrears refers to the accumulated state of having one or more missed payments outstanding.

Although these definitions come from UK legislation and the FCA Handbook, the way the two terms are used in practice varies across different contexts. Credit reference agencies, lenders, and regulators each apply the terms with slightly different thresholds and meanings, which is a significant source of confusion for consumers.

The core distinction is this: a missed payment is a single event; arrears is the ongoing condition that results from one or more of those events remaining unresolved.

The Legal Framework

The treatment of missed payments and arrears in the UK is governed by two main bodies of rules.

1. Consumer Credit Agreements: For personal loans, credit cards, car finance, hire purchase, and similar products, the primary legislation is the Consumer Credit Act 1974 (as amended). This Act sets out mandatory notice requirements, default procedures, and borrower protections. The Financial Conduct Authority (FCA) regulates lender conduct through CONC (Consumer Credit Sourcebook) Chapter 7, which contains rules on how firms must treat customers who fall behind on payments.
2. Regulated Mortgage Contracts: The FCA's MCOB (Mortgages and Home Finance Conduct of Business) Chapter 13 governs how lenders must handle payment difficulties. Mortgages use related but distinct terminology.

The Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 (as amended) prescribe the form and content of default notices that lenders must issue before taking enforcement action.

How Missed Payments and Arrears Are Defined

Under CONC 7.1.3 of the FCA Handbook, the term "arrears" includes any shortfall in one or more payments due from a customer under an applicable agreement. This is a broad definition — it means that, from a regulatory conduct perspective, even a single missed payment can place an account into what the FCA considers "arrears."

However, for credit reference agency reporting purposes, the status codes used across the industry indicate a more graduated picture.

• Status Code '1': Indicates a payment is one month late (a missed payment).
• Status Code '2': Indicates two consecutive missed payments, and this is commonly described across UK credit information sources as representing "arrears."
• Status Codes 3-6: Represent escalating months in arrears.

This means there is a practical distinction in how the terms are applied: the FCA's conduct rules treat any shortfall as arrears, while the credit reporting system reserves the label "arrears" for accounts that are two or more months behind.

How Credit Reporting Works

According to published guidance from the major UK credit reference agencies and the SCOR (Steering Committee on Reciprocity) Principles, missed payments are typically recorded on credit files once they are more than 30 days overdue. The exact point at which a payment within the first 0–29 days is or is not reported may vary depending on the lender and product type.

Once recorded, the status progresses monthly. A status of '1' means one month late; '2' means two months late; and so on up to status '6'. Each month's status marker is recorded as part of the account's payment history, which contributes to a credit file for up to six years. As the account continues to be reported, later status updates reflect the current position; individual monthly markers do not each persist independently in the way that a default record does.

Default registration at credit reference agencies — a more serious marker than a missed payment status — is commonly registered after several months of sustained arrears, often between three and six months. However, the timing is at the lender's discretion and depends on whether the lender considers the lending relationship to have broken down, rather than on a strict month count.

Notice of Sums in Arrears (NOSIA)

Under Sections 86B and 86C of the Consumer Credit Act 1974, lenders are required to issue a formal Notice of Sums in Arrears (NOSIA) when certain thresholds are met.

• Fixed-Sum Credit (e.g., loans, hire purchase): The NOSIA must be issued when the customer has missed payments equivalent to at least two contractual payments. This notice must be sent within 14 days of the threshold being reached. For agreements with weekly or more frequent repayment schedules, the threshold is four missed payments rather than two.
• Running-Account Credit (e.g., credit cards, overdrafts): The NOSIA timing is different. It must be issued no later than the next statement date required under Section 78(4) of the Act.

Once the initial NOSIA has been sent, subsequent notices must follow at intervals of no more than six months for as long as the customer remains in arrears.

Default Notices

A Default Notice under Section 87 of the Consumer Credit Act 1974 is a prerequisite before a creditor can take certain enforcement actions. These actions include terminating the agreement, demanding earlier payment of the full balance, recovering possession of goods, treating the customer's rights as terminated or restricted, or enforcing any security.

The default notice must allow the customer at least 14 clear days to remedy the breach. If the customer resolves the breach before the date specified in the notice, the breach is treated under Section 89 as though it never occurred. Default notices do not apply to regulated deferred payment credit agreements.

Default Registration on Credit Files

Default registration at credit reference agencies is commonly registered after several months of sustained arrears, often between three and six months. However, there is no mandated month count. The SCOR Principles indicate that lenders may take further action by the time an account is at least three months in arrears, but the timing is at the lender's discretion.

A default record remains on a credit file for six years from the date of default, regardless of whether the debt is later settled.

Summary of Key Numbers

The following values are drawn from primary and secondary sources and are presented with their applicable confidence levels.

• 2 payments: The threshold at which a NOSIA must be issued for fixed-sum credit agreements.
• 4 payments: The NOSIA threshold for agreements with weekly or more frequent repayment schedules.
• 14 days: Both the deadline for issuing a NOSIA after the trigger is met and the minimum remedy period that must be provided in a default notice.
• 6 months: The maximum interval between subsequent NOSIA notices while a customer remains in arrears.
• 30 days: In most cases, the approximate point at which missed payments begin to be reported to credit reference agencies, though this may vary by lender.
• 3–6 months: The range within which, according to published industry guidance, lenders commonly register a default.
• 6 years: Missed payment status markers contribute to credit history visible on a credit file for up to six years. Default records have a fixed six-year retention period from the date of default.

"Missed payment" and "arrears" are not always used consistently

One of the most common sources of confusion is that different organisations use these terms differently.

• The FCA defines arrears broadly as any shortfall (CONC 7.1.3).
• Credit Reference Agencies typically describe an account as being "in arrears" once it reaches status '2' (two months late).
• The Consumer Credit Act NOSIA threshold is set at two missed payments. These overlapping but non-identical definitions mean that a consumer may be told they are "in arrears" in one context but not another.

A single missed payment is not the same as a default

A missed payment and a default are different things. A missed payment is recorded as a status code on a credit file and indicates a specific period of lateness. A default is a separate, more significant event that is typically registered after an account has been in arrears for several months. The two are related — defaults follow from sustained missed payments — but they carry different weight and different implications for credit file records.

Catching up does not always prevent a NOSIA

According to published guidance, if a customer catches up on missed payments before a NOSIA is issued, the NOSIA may still need to be sent if the trigger conditions were met at any point. This means that a consumer who resolves a temporary shortfall quickly may still receive a formal arrears notice.

Forbearance does not necessarily stop arrears reporting

Where a lender agrees a temporary payment arrangement (forbearance), arrears may continue to be reported on the customer's credit file even if the customer is meeting the terms of that arrangement. According to the SCOR Principles, whether arrears continue to be reported depends on the period and amount of the arrangement.

Mortgage Lending Uses Different Terminology

In mortgage lending, the terms carry distinct meanings. A "payment shortfall," as defined in the FCA Handbook Glossary and MCOB 12.4, refers to the total sum of periodic instalments (capital and/or interest) that have become due under a regulated mortgage contract but remain unpaid.

• Formal "Arrears" for prudential reporting (MLAR) are defined as a shortfall equivalent to two or more regular payments.
• However, FCA conduct rules under MCOB 13 apply to any payment shortfall, not only to accounts that meet the formal arrears threshold. This means that a mortgage borrower who has missed a single payment is subject to the FCA's conduct protections immediately.

Running-Account Credit Has Different Notice Timelines

Credit cards, overdrafts, and other running-account credit products are subject to different NOSIA timing requirements than fixed-sum credit. Where a NOSIA for a personal loan must be issued within 14 days of the arrears threshold, a NOSIA for running-account credit must be issued no later than the next statement date. This means the notice period can be shorter or longer depending on the statement cycle.

Home Collected Credit Has Modified Thresholds

For home collected credit (doorstep lending), the SCOR Principles note that this type of lending includes "informal flexibility" in repayment arrangements. Arrears in this context are reported when the customer has, in aggregate, missed payments to the value of 4.33 weekly repayments, which is equivalent to approximately one month's arrears. This is a different reporting threshold from other forms of consumer credit.

A single missed payment is recorded as a discrete event on a credit file, typically once it is more than 30 days overdue (though this may vary). It does not, on its own, constitute a default. The regulatory framework distinguishes between a missed payment (a single occurrence) and arrears (the accumulated shortfall).

Under the Consumer Credit Act 1974, lenders are required to issue formal notices once missed payments reach defined thresholds — two payments for most fixed-sum credit, four payments for weekly agreements. These notices are mandatory and must follow prescribed timelines.

For mortgage borrowers, the FCA's conduct rules apply from the first payment shortfall, even though the formal prudential definition of arrears requires a shortfall of two or more payments. This means that regulatory protections begin earlier than the formal arrears classification.

Records of missed payments contribute to credit history visible on a credit file for up to six years, subject to later reporting updates. Default records have a fixed six-year retention period from the date of default. This applies regardless of whether the underlying debt has been repaid.

• Missed Payment vs Arrears: A missed payment is a single event; arrears is the accumulated state.
• Regulatory Triggers: Lenders must issue formal notices (NOSIAs) when missed payments reach defined thresholds (usually two payments).
• Reporting: Missed payments usually appear on credit files after ~30 days. Defaults commonly follow after 3-6 months.
• Mortgages: FCA conduct protections apply from the very first payment shortfall.
• Retention: Missed payments and defaults impact your credit file for six years.