If I Can’t Pay Off My Credit Cards in the UK What Will Happen?

Being unable to pay your credit cards off can be a very stressful situation to be in. As repayment deadlines come and go, it’s easy to feel overwhelmed. Missing credit card payments is a very real challenge that many Brits have to deal with every day and you may find yourself wondering, "If I can't pay off my credit cards, what will happen?" It’s important to fully understand the potential consequences. 

So what will happen if you can’t pay your credit cards, and what can you do to rebuild your credit score following missed payments? In this blog, we’ll tell you all you need to know about this important topic.

What Happens After Missed Credit Card Payments?

There are many reasons why you might not be able to pay your credit card on time: it could be an unexpected life event that throws your monthly budget off, or it could be a long-term challenge you’re facing. Regardless of the cause, unfortunately the consequences are the same. Here’s what you can expect:

• First, you’ll most likely face a late fee or be charged interest for missed credit card payments. 
• Then, if you regularly miss payments, you could lose the ability to make purchases on your card altogether, or face higher interest rates, leading to even more debt in the long run.
• Finally, if you continue to miss payments, the credit card company may close your account and send you a notice of default , which could stay on your credit file for 6 years (or more if it’s left unpaid). Your lender may also employ a debt collection agency to recover the money you owe them. Note:don’t worry too much if you’ve just missed one month’s payments, as it’s uncommon for an account to be sent into default after a single missed payment. 

How Do Missed Payments Impact My Credit Score and Report?

Late or missed payments will be reported to credit reference agencies, which can have significant consequences for your credit health:

• Your credit score can drop following missed payments
• Your interest rate could increase if you continue missing payments
• Multiple missed payments can damage your ability to secure new lines of credit in the future

Your payment history accounts for around 35% of your credit score. For this reason, it’s very important that you pay at least your credit card’s minimum balance each month. However, it’s always best to refrain from overspending on credit and making the full balance repayment each month.

Are There Additional Consequences to Not Paying Off My Credit Cards?

If you don't pay off your credit cards, the missed payments can leave other negative marks on your credit report, which can have long-lasting effects on your future ability to get access to new credit lines. 

We briefly mentioned that multiple missed payments can lead to a default being added to your credit report, where it can remain for as long as six years.

Additionally, if your account goes into default and you still aren’t making payments on your debts, you could be issued a County Court Judgement (CCJ), which tells other lenders that you can’t repay your debts. If the credit card company files a CCJ against you, you could even end up having debt repayments taken from your wages.

CCJs could hurt your ability to secure anything from new lines of credit, to places to live and job opportunities. Like a default, CCJs also remain on your credit report for up to six years, even when paid in full. If you default on your payments, it is essential to resume payments as quickly as possible to avoid a CCJ. 

How to Start Rebuilding Your Credit Score

While it can certainly be scary to go through the aftermath of missed credit card payments, it’s important to stay positive and focus on creating a plan. The good news is that there are steps you can take to reestablish your credit score and move forward on the path to financial health:

1. File a Notice of Correction

If your missed credit card payments were the result of circumstances beyond your control, such as hospitalizations or unexpected company layoffs, adding a notice of correction to your credit report can explain your situation.

While a notice of correction won’t fix your credit score, it can provide helpful context to lenders who are reviewing your credit report and considering extending you a line of credit. However, if you have repeatedly missed payments, a notice of correction isn’t going to help you.

2. Use Your Credit Card Wisely

The first step toward getting back on track with your payments is being smart about how you use your credit card. 

• Use your credit card like a traditional bank card: You should only be spending what you can afford, regardless of whether you use cash or a credit card. Living by this rule can prevent you from overspending.
• Stay below your credit limit: Just because you can charge up to £1,500 a month on your credit card doesn’t mean you should. Best practices suggest staying below 25% of your credit limit at any given time. You can pay your balance off early if you need to use your card beyond that amount. Learn more about your credit utilisation ratio.
• Never miss a payment: We can’t emphasise this enough. Your payment history has the largest impact on your credit score, so focus on always making at least the minimum payment, although the ideal habit is to pay off your credit cards in full.

3. Download the Pave App to Start Building Credit

If you’ve missed credit card payments, you’re probably wondering how you can start rebuilding your credit, which can be a daunting task in itself. Fortunately, Pave exists to make that process easier.

With personalised credit fixes and active credit building, Pave reports the payments you make each month to credit reference agencies so they contribute to your credit score. Additionally, with our bills monitoring, we’ll help you track and make your payments each month to continue building your credit.To start building credit the right way, download the Pave app from the App Store or Google Play today.