Does persistent debt affect your credit score?
Written by
Emily Tye
Reviewed by
Amy LancashireNot directly. The persistent debt label itself isn't shared with credit reference agencies, so it doesn't appear on your credit file.
But that doesn't mean your score is untouched. Persistent debt usually goes hand in hand with a high balance you're only paying the minimum off, and that balance is likely already affecting your score through your credit utilisation. Knock-on effects like a reduced credit limit or a missed payment can hurt it too. So the honest answer is that the label won't harm you, but the situation behind it often already is. This guide explains what does and doesn't reach your credit file, and what to do about it.
What counts as persistent debt?
You're in persistent debt when, over an 18-month period, you pay more in interest, fees and charges than you pay off the actual amount you borrowed. It usually happens when you only make the minimum payment each month, so the balance barely moves while the interest keeps building.
It's more common than most people think. When the FCA's persistent debt rules came into force, the regulator found 4 million accounts were in persistent debt, with customers paying on average around £2.50 in interest and charges for every £1 they repaid.
Persistent debt is a regulatory status between you and your card provider. It's designed to prompt help, not to punish you, and on its own it isn't a black mark.
Does persistent debt show on your credit report?
Not as a marker of its own. Being classified as being in persistent debt is not reported to the credit reference agencies (Experian, Equifax and TransUnion), and neither are the letters your provider sends you at each stage. Someone checking your credit file cannot see that you've been flagged for persistent debt.
What they can see is the underlying picture: your balance, your credit limit, whether you've kept up your payments, and how much of your available credit you're using.
Because credit files are updated monthly, a balance that barely moves over time is visible too. Lenders can read this raw data and make their own judgement, so a lender can still see a high balance you're making little progress on and weigh that up when you apply for credit, even without a label telling them to. That underlying picture is also where any effect on your credit score comes from.
How persistent debt can affect your credit score indirectly
The label doesn't hurt your score, but the circumstances that come with persistent debt can. Here's how:
High credit utilisation. Only paying the minimum keeps your balance high compared to your credit limit. That pushes up your credit utilisation ratio, which can negatively impact your score. A balance that sits near your limit month after month can signal to lenders that you're stretched.
A reduced credit limit. To stop your balance growing, your provider might lower your credit limit. If your limit drops while your balance stays the same, your utilisation goes up even though you haven't borrowed any more.
An arrangement to pay marker. If you can't afford to increase your payments and instead agree to pay less than your contractual minimum, your provider can record an "arrangement to pay" marker on your file. As National Debtline notes, if you start paying less than your original minimum payment, this can be reported to credit reference agencies, which can impact your score.
Missed payments. Paying the minimum keeps your account up to date. But if you miss a payment entirely, or fail to pay an increased amount you've agreed to, that gets recorded. Missed payments and defaults can affect your score and stay on your credit report for six years.
What happens at 18, 27 and 36 months?
Under the FCA's persistent debt rules, your provider has to step in at set points. None of these letters is reported to credit reference agencies. Any effect on your score only comes from the actions that follow.
Stage | What your provider does | Effect on your credit score |
|---|---|---|
18 months | Writes to you, encourages you to pay more than the minimum, and warns your card could eventually be suspended | None from the letter itself |
27 months | Writes again with a similar message if nothing has changed | None from the letter itself |
36 months | Must offer a way to repay the balance in a reasonable period (usually 3 to 4 years), which could mean suspending the card, a higher fixed payment, or a repayment plan* | Possible if your limit is reduced or a repayment arrangement is recorded |
*If you can't afford any of these options, your provider has to go further. Under the same rules, it must offer forbearance, which can include reducing, waiving or cancelling the interest, fees or charges on your account to help you clear the balance.
What are my options if I'm in persistent debt?
Paying more than the minimum if you can. Even a small fixed amount above the minimum payment on a credit card goes a long way, because more of it clears the balance instead of the interest. Paying down the balance also lowers your utilisation, which can help your score.
Look at the bigger picture. If you've got debt on more than one card, it's worth reading up on how to pay off credit card debt and what affects your credit score so you can prioritise.
Get free debt advice if you're struggling. If you can't afford to pay more, you don't have to work it out alone. Free, confidential help is available from StepChange, National Debtline and MoneyHelper. It's also worth reading about how a debt management plan affects your credit score or Breathing Space and your credit score.
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