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What To Do If You Have A Delinquent Account

4-Minute ReadUPDATED: March 13, 2023


Everyone would like to pay their bills on time and in full when they’re due, but life has a way of making that impossible at times. With all the expenses people face today – from high rent bills to rising gas prices, soaring medical bills and other costly life events – it can be easy to fall behind on your payments.

Unfortunately, short-term consequences result when payments are late. From penalty fees to harm to your credit score, late payments can have costly consequences. Fortunately, there are ways to recover financially even after credit card accounts or loans have fallen into delinquency.

Let’s walk through our delinquent credit explanation and what actions you can take to overcome the negative impacts of your account’s delinquency.

What Is A Delinquent Account?

Technically, accounts are delinquent as soon as a borrower misses a payment due date. For example, if your personal loan payment is due on the 5th of every month and you haven’t paid on the 6th, your account is delinquent.

However, many credit card providers and mortgage, auto and student loan lenders offer payment grace periods and won’t report your monthly payments as late until you’ve missed your due date by 30 days or more.

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What Does Delinquent Account Mean?

It will cost a borrower even more money – in late fees and higher interest rates – when their payments are late.

Late Fees

Late payments can have some serious ramifications for a borrower’s financial situation. Their credit score will plummet, and some providers may raise the interest rate they charge or impose a high penalty fee. The borrower’s credit reports will show that they’ve missed payments, which will make it more difficult for them to qualify for a new loan or credit card.

If the borrower continues to make late payments or stops paying altogether, their lender might eventually close their account. This will vary by provider, but many will close an account after a failure to make a payment for 90 days or more. The money owed isn’t forgotten, though. Lenders expect and will pursue repayment of the full balance.

Report Made To Credit Agencies

If you can make your required monthly payment before you’ve hit that 30-day mark, your lenders and credit card companies won’t report your missed payment to the three national credit bureaus: Experian®, Equifax™ and TransUnion®.

That’s good since a single late payment can send your three-digit credit score plummeting by 100 points or more. These missed payments also stay on your three credit reports for 7 years.

Lenders usually won’t take punitive measures against a borrower until their loan is delinquent for a longer number of days. For instance, credit card providers can’t raise a borrower’s interest rates because of missed payments until they’ve fallen at least 60 days behind on paying their card.

Account Sent To Collection Agency

Lenders can send an account or loan to a debt collection agency once a payment is 31 days or more past the due date. Most, though, probably won’t take this action so quickly. There are no rules here, but many lenders and credit card providers want to work with the borrower and will wait until they are around 180 days late before sending the account to a collection agency.

Don’t wait that long to pay off the unpaid debt, though. Collection agencies can be aggressive in tracking down the money they are owed.

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What Should I Do If I’m Behind On My Credit Card Payments?

When someone falls behind on credit card payments, there are several ways to get back on track. 

Automate Your Processes To Enforce Payment Discipline

If you’re still on the right side of delinquency – you’ve received past due notices and paid late fees but your account hasn’t been suspended or subject to collection – automating your payment process could go a long way toward resolving credit deficiencies.

If your life is already packed full with long hours at work, side hustles, fitness goals and family commitments – just to name a few of the demands on our time and attention – organizing your budget and automating your bill payments will take the stress and hassle out of making sure payments are on time. Plus, you can reap the benefits of an improved credit score and no more late fees.

Call Your Lender To Ask For A Payment Plan Or Settlement

It may seem counterintuitive, but the first thing you should do when you run into financial headwinds is contact your lender. They may be willing to work out a compromise or plan that will keep your account from falling into delinquency.

Lenders might allow you to make a smaller monthly payment that you can afford each month until you pay off your debt. Some lenders might take less than what you owe just to get at least some money from you. Say you owe $10,000 in unpaid credit card debt. Your provider might accept a one-time payment of $6,000, taking the remaining $4,000 that you owe as a loss.

Consider A Loan To Consolidate Your Debts

If you can’t work out a solution directly with your credit card provider, you might consider debt consolidation. Under this process, you work with an outside company that combines all your debts into one large loan. You use these funds to pay off your other debt and then make regular payments on this new loan.

The goal is to end up with a single loan that comes with a lower interest rate than the average rate on your outstanding debts. You also want a monthly payment that you can afford to make.

Think About Negotiating

Lenders are engaged in a business, and as such, they don’t take it personally if a borrower tries to negotiate a reduction in their account balance. 

To Settle Your Debt

If there are multiple delinquencies, a borrower might receive offers from debt settlement companies. They offer to negotiate with creditors on your behalf to lower the total payment due in return for a lump sum payment to settle the account in full.

But be wary. The Consumer Financial Protection Bureau warns that dealing with these companies can be risky and leave borrowers with more debt than before.

Here’s a secret, though: You can do for yourself – or find a skillful negotiator among your family and friends who’s willing to help – what debt settlement companies claim to do. You or your designated representative can call and try to negotiate an amount less than what’s owed in return for a lump sum payment-in-full.

To Pay What You Owe

If you can negotiate a lower payback amount that allows you to pay off what you owe and you can get financial help from a friend or family member or access cash through a loan against your home equity or another asset, you can immediately put the matter behind you and rebuild your credit.

However, you can also negotiate a repayment plan with your creditors that will take your financial situation into account. If your situation is temporary, as with a job loss or illness, they may be willing to enter into a short-term forbearance that will give you some breathing room while your problem resolves.

If you have a chronic problem with making ends meet, the first step is to create a household budget listing your monthly expenses and income. Consider some ways of reducing your credit card debt and finding ways to reduce your debt load.

If this seems overwhelming, consider asking someone more comfortable with spreadsheets than you to help you get started. There’s no reason to feel embarrassed – many people aren’t taught basic financial literacy and how to manage their money in school. You certainly won’t benefit if you continually run short on cash, even with a good salary, and continually dig a bigger whole. 

If possible, try to make the minimum payments and stop using your credit cards while you pursue a settlement or a debt consolidation loan. It will result in far less long-term damage to your credit score and give you more loan options at a lower cost. 

Consider Bankruptcy, But Only As A Very Last Resort

If you have so much debt that even the minimum monthly payment is too high, or if you’re worried that it will take you years to pay off your credit card debt by only making the minimum payments, it may be time to look for alternative solutions.

One solution if your debt problems are too overwhelming is filing for bankruptcy protection. You should take this step only as a last resort, though. Bankruptcy will remain on your credit history for 7 or 10 years, depending on the type of bankruptcy you file.

Filing for personal bankruptcy is a big financial setback, and if it’s something you’re considering, it’s best to speak with an attorney about your options before making a decision.

Rebuilding Credit After Your Accounts Become Delinquent

Next, keep your credit card balances and your overall debt level low. Your debt-to-income (DTI) ratio is a strong measure of your financial health.

Add up all your monthly debt payments and divide them by your gross monthly income. Use this debt-to-income calculator to calculate your DTI and try to keep it around 36% or lower.

Final Thoughts

If you experience financial issues, don’t ignore your creditors. Get in touch with them as soon as you realize there’s a problem to work out a repayment agreement. Then automate your payments and make sure they’re on time and meet minimum amounts.

If you’re ready to take the first step toward consolidating your debt, apply for a debt consolidation personal loan online today.

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