- A delinquency on your credit report refers to a payment that is at least 30 days past due.
- Your credit score drops exponentially as your credit account falls deeper into delinquency.
- Most adverse information on your credit report, delinquencies included, falls off after seven years.
When you apply for a loan or a credit card, these creditors evaluate your credit history to see how risky of an investment you might be. One of the red flags these lenders look for is delinquency, a period where you had an overdue payment for an extended period of time.
It's in your best interest to avoid these and the subsequent late fees, higher APRs, and hits to your credit score. However, if you find you're already in this situation, you still have options to salvage your credit.
What is a delinquent account?
A delinquent account is a missed minimum payment on borrowed money such as a loan, mortgage, or line of credit. Technically, your credit account falls into delinquency the first day your payment is past due. However, creditors usually don't report a missed payment to the credit bureaus until that payment is 30 days past due, at which point it appears on your credit report.
This has serious ramifications for your credit score, which indicates to potential lenders how likely you are to repay a debt. If a lender sees an extended period of time on your credit history where you didn't make a required payment, it might lead them to think that if you've done it once, you're likely to do it again.
Delinquency stages and credit impact
Credit card delinquency comes in stages. If you continue to miss payments for multiple months, each stage comes with a kick to your credit score, which compounds exponentially as you fall further into delinquency, as well as additional consequences.
30 days past due: At 30 days without payment, your missed payment officially falls into delinquency. Your credit card company will report the payment to the three major credit bureaus, and you'll see that reflected in your credit score, which will take a hit.
60 days past due: The consequences start compounding the longer a bill is left unpaid. After 60 days, most credit card companies will hit you with a penalty APR for failing to make a payment on time. The penalty APR period will vary depending on your credit card company. Most penalty APRs end after you make a certain number of consecutive on-time payments; others are applied indefinitely.
90 days past due: A credit card company might send your debt to a third-party collections agency after 90 days of delinquency. These agencies will hound you with phone calls in an attempt to push you to make good on your outstanding debt. On top of this, keep in mind that with each passing month, your credit score continues to decline.
180 days past due: At 180 days into delinquency, credit card companies are required to charge off your debt, meaning they write the debt off as a loss and close your account off to future charges. However, this doesn't mean you're free of your debt. A credit card company may send your debt to a third-party collection agency. If your debt is above a certain amount deemed sufficient for legal action — usually over $8,000 — a credit card company may also sue you.
How to recover from delinquency
Goodwill removal
While you cannot remove a correctly reported delinquency from your credit report on your own, your creditor can. You can try asking your creditor to forgive the late payment and remove it from your credit history through a goodwill letter. This scenario is most probable if you have a good reason for missing your payment such as an illness or disaster out of your control. If the late payment wasn't your fault and you can provide documented proof, that may also be a reason for your creditor to forgive your late payment.
Even if you don't fall into these categories, if you have a good relationship with your creditor or otherwise spotless payment history, your creditor may agree to make a goodwill adjustment.
Creditors are under no obligation to grant your adjustment request. If your creditor refuses to remove a missed payment from your credit report, you're stuck with the delinquency until it drops off your credit report. Fortunately, your credit history is constantly cycling.
A delinquency will fall off your credit report seven years after the date your account first became delinquent, also known as the original delinquency date. Even before that seven-year mark, as a delinquency ages on your credit report, its effect on your credit score will fade.
Credit cards for building credit
Obtaining a credit card designed for building credit can also help you build a positive payment history and a positive tradeline. The best secured credit cards can be useful tools for building a positive credit history. Top cards include the Discover it Secured card and the Capital One Quicksilver Secured card.
Credit counseling
Reach out to a credit counselor to receive advice and develop an action plan for financial recovery. Credit counseling can help you manage debt, create a reasonable budget, and repair credit over time. Credit counselors can even negotiate with creditors on your behalf to reduce interest rates, lower monthly payments, and waive late fees.
Dispute a delinquency on your credit report
If a delinquency is accurately reported, going through your creditor is your only option to remedy the situation. However, you may find that a delinquency was incorrectly recorded on your credit report. Perhaps you made the payment on time, or it's been over seven years since your account first fell into delinquency. In that case, you will need to dispute the delinquency with each of the three major credit bureaus: Experian, Transunion, and Equifax.
The first thing you will need when you file a credit report dispute is a copy of your credit report. You're entitled to one free credit report on a weekly basis from each credit bureau, which you can request at AnnualCreditReport.com.
Before you file your dispute, you will want to prepare the following documents and information:
- Your name, addresses you've lived in over the past two years, date of birth, and Social Security number
- A list of the mistakes you want to be rectified with the corresponding account number and why they should be rectified
- A copy of your credit report with each mistake circled
- A copy of a government-issued ID
- A utility bill or bank statement
- Documents that support the information you've given
- Send copies of these documents, not the originals.
With those documents in hand, you should file a dispute with each bureau.
Experian: You can file a dispute at Experian through its online disputes hub or the phone number listed on your credit report. You can also file your dispute through the mail at Experian, PO Box 4500, Allen, Texas, 75013
Equifax: You can dispute an Equifax credit report through its credit report services hub. You can file disputes over the phone at 888-397-3742 or by mail at PO Box 740256, Atlanta, Georgia, 30374-0256
TransUnion: File a dispute through TransUnion's credit disputing hub. You can call 833-395-6941 for a dispute expert at TransUnion or through the mail at TransUnion Consumer Solutions, PO Box 2000, Chester, Pennsylvania, 19016-2000
How to bring delinquent accounts current
Pay off delinquent debt
To get out of delinquency, you will need to settle all the minimum payments that have accrued while you were in delinquency.
For example, let's say you're 90 days into delinquency with a minimum payment of $35 each month. Even if you've finally paid off that first $35 that initially put you into delinquency, you still have two minimum payments, one that is 60 days overdue and one that is 30 days overdue, left outstanding. You need to pay those off to finally be free of delinquency.
And while every payment is a step in the right direction, making contributions below the minimum payment will not affect your delinquency status. It's much more worth your time and money to wait until you have a full installment on hand before making a payment.
Negotiate a payment plan
If you're finding it difficult to make your payments, it is also possible to negotiate with your creditor and set up a payment plan. You may also qualify for a hardship payment program that some credit card companies offer. In any case, it's best to communicate with your creditors so they aren't left in the dark with a debt to settle.
How to avoid delinquency
Although you can recover from delinquency, it's best to avoid it in the first place if you can.
Make all payments on time
Pay all bills on time, set up automatic payments with your creditors, or set up reminders to ensure that payments are made on time. Also, create a budget that includes all of your bills and prioritizes debt repayment.
Consolidate debt
Consider consolidating your debt into one monthly payment; it may be easier to keep track of one payment instead of three, and it may be easier on your budget. Consolidating credit card debt with a loan may even improve your credit score, since consolidation can have a positive impact on your credit utilization by lowering the balance owed on credit cards.
Contact creditors
If you find yourself struggling to make your payments, contact your creditors before you become delinquent. You will find that your creditors are easier and more willing to work with before you become delinquent than after. And remember, your creditors want to get repaid, so it's in their best interest to work out a payment plan or settlement with you.
Monitor your credit reports
Monitor your credit reports on a regular basis to ensure that all payments are being applied correctly. If there is an error, you can catch it early and dispute it.
Frequently asked questions about credit card delinquency
What are the consequences of credit card delinquency?
The consequences of credit card delinquency are a lower credit score, late fees, and potentially a penalty APR of up to 29.99%. These will begin once you've missed a minimum payment by 30 days.
Are credit report disputes free?
Yes, credit report disputes are entirely free — even if your dispute is rejected.
How long does a credit delinquency last?
A credit delinquency lasts for seven years before it no longer appears on your credit report. However, its effects decrease over time.
How do I rebuild my credit after delinquency?
To rebuild your credit after delinquency, start by getting your credit report and disputing any errors. Negotiate a payment plan with your creditor to start fixing your history of on-time payments and limit your credit use for the immediate future. Avoid applying for new credit in the short term, although you may consider credit-building products like a secured credit card or a credit builder loan.
