What To Do When You Have Delinquent Debt
Technically, even debt paid a day late is considered delinquent. That doesn’t mean that all delinquent debt automatically hurts your credit score. Lenders and credit card companies usually wait 30 days to report late payments to the credit bureaus.
Still, delinquent debt (even unreported) can mean late fees, repossessions and other penalties. Learn more about delinquent debt — what it is, how to avoid it and what to do about it.
- Creditors usually wait until a payment is 30+ days late before reporting it to the credit bureaus. The longer a payment remains past due, the more serious the consequences typically become.
- Payment history makes up 35% of your FICO Score, so making on-time payments is essential to good credit.
- A late payment will typically show on your credit report for seven years. The older the debt, the less impact it has on your score, generally.
What is delinquent debt?
Delinquent debt simply means your payment is past due — even by one day. That said, lenders and credit card issuers usually don’t report missed payments to the credit bureaus until they are 30 or more days late.
Late payment fees may be issued immediately, but it’s not uncommon for creditors to offer a grace period. Not all lenders offer grace periods, but when they do, you might have a week or two before you get charged a late fee.
It’s important to check your specific contract for information about grace periods and credit reporting. If you’re behind on payments, here are some terms you’ll run into.
| Term | What it means |
|---|---|
| Late payment | You missed the due date (but consequences depend on the lender’s policy) |
| Delinquent | You missed the due date (but consequences depend on the lender’s policy) |
| Reported late | The lender reports the missed payment to the credit bureaus (commonly after 30 days late) |
| Default | You’ve broken the loan or card agreement long enough to trigger default terms, meaning your lender may be able to legally oblige you to immediately pay back all outstanding debt |
| Charge-off | The creditor has written off the debt for accounting purposes and may have sold it to a collection agency |
| Collections | The creditor or a third party hired by the creditor tries to collect the debt through phone calls, letters and/or legal means |
When will I be reported as delinquent?
Payments are usually reported as delinquent once you’re 30 days late, but it depends on the creditor. Some report late payments in 30-day increments (30-days late, 60-days late, 90-days late, for instance). The later the payment, the worse impact on your credit score.
You might not see the late payment on your credit report right away after it’s been reported. Usually, it takes a month for your credit report to update with new information. When the late payment is added, it will show the date it was originally due.
If the bill remains unpaid, your creditor could consider your loan in default. Default can trigger certain terms in your contract to activate. For instance, the creditor might demand you pay your loan in full, not just the past due balance.
Defaults typically don’t occur until you’re 90 days late, but it depends on your contract and the type of loan. Mortgage default is possible just 30 days late (although you generally have 120 days until foreclosure). But most federal student loans aren’t considered in default until payments are 270 days late.
What happens after I’m considered delinquent?
When you’re just a few days late, your lender may give you a courtesy call or text message to remind you to make your payment. As the payment becomes more delinquent, these calls will likely come more frequently and take on a more serious tone. Eventually, you might find debt collectors calling with threats of legal action.
Although each loan and/or credit card contract is unique, here’s a timeline of what you may expect if you have delinquent debt. Also, keep in mind that your credit score will typically continue to drop the later the payment becomes.
| Time past due | Consequences |
|---|---|
| 1 to 30 days |
|
| 30 to 90 days |
|
| 90 to 120 days |
|
| 120 to 180 days |
|
| 180+ days |
|
How does a delinquent account affect your credit score?
Payment history makes up 35% of your FICO Score, making it the single most important factor that makes up your credit.
According to FICO, one missed payment could cause your score to drop by 50 to 100+ points, but it depends on your current credit score and how late you are.
Delinquent accounts tend to cause a more significant drop for those with higher credit scores. A late payment for someone with excellent credit could be a sign of new financial issues.
A missed payment can remain on your credit report for up to seven years. Usually, the late payment will affect your credit score less and less as time goes on.
Charge-offs and collections appear on your credit report as separate actions and will further drive down your score than the delinquency alone.
How can you avoid delinquency?
Delinquency is stressful. Once it’s reported to the credit bureaus, an overdue account can make it much harder to borrow money in the future. Here are a few ways you can stop the problem before it starts.
Only borrow what you can afford
Whenever you’re considering borrowing money — taking out a personal loan, for instance — it’s vital that you’re sure that you can repay your monthly installments on time, every time. Before signing on the dotted line, use a personal loan calculator to get an idea of how the loan will fit into your budget.
Stay in contact with your lender
Keeping an open line of communication with your lender can be more impactful than you may think. Your lender wants to get paid what you owe (even if the payment is late), so they may offer options to help get you back on track.
For instance, mortgage modification might help if you’re falling behind on house payments. Federal student loan borrowers might qualify for an income-driven repayment plan, which could drastically reduce their monthly payments, helping them to avoid default.
Ask LendingTree: Is it worth asking your lender for a payment extension?
Absolutely, yes. Asking for an extension doesn’t mean you won’t ever have to pay, and interest could continue to accrue. But if you succeed, you can skip those payments without worrying about wrecking your credit, getting hit with late fees or dealing with angry demands for past-due payments.
Create a budget
Creating a budget to pay off debt is one of the first steps toward avoiding future delinquency. Before adding to that credit card balance, take stock of who you owe, how much you owe and when your payments are due. You may find that your next purchase should wait until you’re in a better financial place.
Dip into your emergency savings
While it’s not ideal to dip into your emergency fund, it could be worth it if you’re at risk of delinquency. After all, that’s what a rainy day fund is there for.
And if you don’t have an emergency fund, don’t feel guilty — it can be a challenge to save. Creating a budget might help you find extra room.
Sign up for credit counseling
If you’re having a hard time making ends meet, you could consider credit counseling. At no (or low) cost, a certified credit counselor can help you re-evaluate your budget and teach you debt-management strategies that can help you avoid delinquency and default in the future.
Consider debt consolidation
Debt consolidation can be a powerful tool for those juggling multiple credit cards or personal loans. If you’re getting close to delinquency on more than one account, you could take out a consolidation loan to completely pay off your past-due balances. Then, you’ll only have one debt to pay — your consolidation loan.
Since they’re a type of personal loan, debt consolidation isn’t the answer for everyone — make sure you can afford your consolidation loan first before pursuing this option. Taking on additional debt you’ll struggle to repay won’t solve anything.
Frequently asked questions
If you notice a delinquent account on your credit report that shouldn’t be there, you can dispute credit report errors by contacting the bureaus.
To remove a delinquent account from your credit report, prepare to provide supporting documentation as to why the delinquent account should be removed, such as proof of payment or police reports associated with identity theft.
But if the delinquent account is correct as reported, you’ll have to wait for it to fall off your credit report, typically seven years after the date of delinquency.
If you’ve paid the delinquent account in full, you may be able to write to the credit bureau and request a goodwill adjustment, but there’s no guarantee that this strategy will work.
Outside of your standard monthly bill, many lenders and credit card companies send courtesy payment reminders via phone, email or text message. Eventually, you’ll receive a past-due notice in the mail. To see if your payment is truly delinquent rather than just late, order a free copy of your credit report and review your payment history.
You may qualify for a loan with a delinquency, but it depends on the lender and your overall creditworthiness. A delinquency will make it harder to get a loan — and if you do qualify, you’ll probably receive a higher interest rate. Lenders that specialize in bad credit loans may be willing to work with you, and adding a cosigner or co-borrower could also help.
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