Your Guide To Dealing With A Delinquent Account

If your unpaid bills are starting to pile up, you may have a delinquent account. Typically, lenders or creditors will consider your account delinquent once it’s 30 days or more past its due date.

Let’s examine the impact of having delinquent accounts, what types of accounts can be delinquent and how you can pull yourself out of a cycle of late payments or nonpayments and start repairing your credit history.

What Is A Delinquent Account?

If you’re a day or two late on your payment, a credit card company or mortgage lender won’t automatically consider your account delinquent. You might have to pay a late fee, but you won’t face many consequences at this point.

That generally changes once you’re 30 days late on a payment. At that point, the creditor will report it to the major credit bureaus – Experian, TransUnion and Equifax – as a delinquent account.

What Happens When An Account Is More Than 30 Days Past Due?

By the time a credit card payment is 60 days late, the account holder might have to pay a higher interest rate – sometimes known as a penalty APR – on their credit card account. They’ll likely face more late fees and, by day 90, the creditor may close the account.

Once the account is 120 days late, the creditor may hand the account over to a debt collection agency and “charge off” the delinquent credit card account, which means the creditor stops trying to collect. This will result in a hit to the debtor’s credit score.

The timeline described here for reporting credit card delinquency can apply to other types of accounts as well. It’s best to handle your payment for student loans, mortgages, auto loans and other debts just as you would handle a credit card debt.

What A Delinquent Account Can Mean For Your Credit

Your credit history is in jeopardy if you have delinquent accounts. Typically, delinquent payments will stay on your credit report for 7 years past the delinquency date, according to rules of the Fair Credit Reporting Act (FCRA). 

Typically, newer delinquencies have a greater impact on a consumer’s FICO^® credit score than late payments from years ago, however.

Other Consequences Of Delinquent Accounts

Your credit card issuer may withhold rewards points associated with your account if you’re no longer in good standing.

Delinquency can also affect your ability to secure a loan to buy a home or a car. Sometimes, mortgage lenders ask people with delinquencies on their credit report to pay a higher rate for homeowners or renter’s insurance.

You may also have to pay extra deposits when renting an apartment or hooking up your utilities.

How To Handle Delinquent Accounts

If you’ve had a few financial difficulties that led to one or more delinquent accounts, you can start correcting the damage in a few ways.

Contact Your Creditor

If you’ve typically paid bills reliably to a financial institution, contact that institution if you’re worried about a late or missed payment that could turn delinquent. Explain that you have a solid previous payment history and that you’re concerned about your credit history being impacted. Ask what steps you can take to get the institution to reconsider reporting the delinquent account to the major credit bureaus.

Some places may be willing to explore hardship options. They may even work with you on a payment plan if you’ve faced health problems or job loss. Keep in mind, though, that creditors are not legally responsible to help you in these situations.

Verify The Transactions

Be sure that all the transactions on your credit card bill or other accounts are valid. Unknown charges may indicate you’ve been the victim of identity theft. You’ll want to ensure that you’re only paying for valid charges to your account.

Start Paying On Time Going Forward

Consider how you can start taking steps to pay on time. Automatic payments are often a good option. Even setting up a minimum payment each month can help prevent negative impacts on your personal finances.

Ensure That Your Other Accounts Are Paid On Time

Be sure you don’t have other delinquent accounts. Many Americans carry student loans, mortgage loans, auto loans and various other debts that could lead to late payments.

Again, consider setting up automatic payments so a one-time delinquency doesn’t become a pattern. You’ll also avoid future late fees.

If you’re falling behind on bills, you might want to consider working with a credit counselor who can put you on a debt management plan that can help you stick to a budget while paying down debts.

Review Your Credit Report And Contact The Credit Bureaus

If your delinquency was 7 or more years ago, contact the credit bureaus to ensure it’s been removed. Start by reviewing your credit report from all three credit bureaus. Contact any bureau still showing the delinquency and request that they remove it.

Reconsider Closing Credit Card Accounts

Keeping older credit cards might help protect your credit score. If you have a credit card account you’ve paid reliably, resist the urge to close it. This may prevent further damage to your score.

Consolidate Your Debts

Those who are behind on payments for several accounts can also consider debt consolidation. Simply put, debt consolidation allows you to take out a new loan and use the funds to pay off your existing debts. So, instead of having multiple debts, all of your debts are consolidated into one loan.

This can help eliminate higher-interest debt and simplify payments. It may also assist with expense tracking – another way to prevent late payments.

Delinquent Account FAQs

Here are questions that people often ask about dealing with delinquent accounts and late payments.

What happens when an account is delinquent?

Typically, financial institutions consider an account delinquent if they haven’t received payment within 30 days of the due date. At that point, they may report the account to the major credit bureaus as delinquent. Steps your creditors take at that point may depend on whether it’s a credit card, student loan, mortgage loan or other type of account.

How do I fix a delinquent account?

A delinquent account drops off of your credit score 7 years after the date it was reported delinquent. If you expect to possibly be more than 30 days late on a payment, you can ask your creditor not to report it as delinquent – but you’ll need to be proactive and demonstrate you’ll be on time with future payments.

Can I still pay a delinquent account?

If you’re later than 30 days on paying a debt, it’s still best to continue paying it. Better yet, set up automatic payments to guarantee at least a minimum amount of on-time repayment each month. This will likely ensure that your account isn’t closed or referred to a debt collection agency.

The Bottom Line: Take Immediate Steps To Resolve A Delinquent Account

If you’re concerned about a late or skipped payment turning into a delinquent account, connect with your creditor before it happens. Explain the situation and ask for guidance on how to resolve it without your credit report suffering.

Even if you can’t stop the delinquency from impacting your credit score and history, you should still take steps to prevent further damage to your finances. Automatic bill pay is a great strategy for getting a minimum amount paid to your creditors.

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