If you've seen an 'AR' mark on your credit file, then the chances are you might assume that they relate to payment arrears. However, the fact is, that on many credit file providers' reports, if you see an 'AR' appearing in the payment history; this means an arrangement to pay has been recorded on the account.
Arrangement to pay (shown as 'AR') shows that the lender has agreed to take a reduced monthly payment.
This arrangement is often a short-term solution, until the borrower can make the full payments again. They will also need to clear any arrears which may accrue as a result of the arrangement. There're subtle differences between this and mortgage payment holidays, which do not appear on your credit report.
If an arrangement is in place, then payments are being made, however lenders may view it as a sign that you are unable to keep up with your payment agreements. In this case, an arrangement to pay's impact on your credit file can be severe. An 'AR' does tend to have a negative impact on the credit score and rating.
This means that any mortgage, loan or finance applications you make may be adversely affected by the presence of an 'AR' marker.
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Each lender has their own criteria about what they are willing to accept on your credit file, so they'll need to run a credit check before they decide to offer any credit to you. Be aware that the arrangement to pay will be visible to them, however, it is their decision as to whether they accept your application or not.
In extreme cases, an arrangement to pay can be viewed as negatively as a default mark. This is because the borrower is unable to fulfil the agreed repayment of the debt when it falls due, which is similar to an account going into default. On the other hand, a lender may take the view that a payment (although reduced) is being made regularly as part of the arrangement and would not take as severe a view of the arrangement to pay history.
Like most other forms of negative information on your credit file, it will remain for 6 years from the date of the last "AR" payment. If you do go into an arrangement to pay with a lender, it is important to make sure that you keep up with those payments to avoid additional negative markers appearing on your report, which could prevent lenders wanting to offer you credit in the future.