How To Recover From Credit Delinquencies

A credit account is considered delinquent once it’s retained a missed payment - yes, just one single missed payment. Most of us don’t go into debt with the intention of not satisfying repayment, however, sometimes life or financial circumstances can prevent us from meeting obligations; sometimes, missing a payment is as simple as just forgetting!

Let’s take a closer look at what missing payments with your creditors can do and how to recover from credit delinquencies.

What is credit delinquency?

Technically, being one day late with any payment to a creditor puts your account into a delinquent status. However, most creditors will not report your account as delinquent until you are 30 days or more late in making a payment. Before you reach the 30 day time frame, most creditors will notify and provide reminders urging you to make your missed payment.

Once you’ve reached 30 days late, your creditor will begin to take certain steps; steps will also be taken at 60, 90, and 180 days late. Here’s what you can expect:

30 Days Late - Most creditors at this point will report your account as late to the credit agencies. They will then begin trying to reach you regarding payment by phone, mail, and email. You can begin accruing late fees at this point.
60 Days Late - If your creditor has not done so yet, your account will be reported as late to the credit bureaus. Once your account is 60 days past due, your creditor has the capability of raising your interest rate to the penalty rate that was mentioned in your terms and conditions. After you’ve caught up your payments, the penalty rate will often go back to normal on purchase you’ve previously made; however, the penalty rate may stay in place for future purchases. You will also continue to accrue late fees.
90 Days Late (and beyond) - At this point, your account is considered seriously delinquent. Once this happens, often you are no longer able to make payments to the account. Your account will continue to be reported to the credit bureaus as late. You will continue to accrue late fees.
180 Days Late - At this point, many creditors will charge off your account and sell the balance off to credit collection companies. This will be reported to the credit bureaus.

What can happen due to delinquency?

Small or big, the consequences for delinquency can linger for years and make a serious impact on your financial health. Problems you can incur due to delinquent accounts can include the following:

Late fees, which increases your debt total
APR increases, sometimes permanently
Lowering of credit score, sometimes by as much as 120 points
Debt collection
Potential lawsuits for unpaid debt

So, what should you do if you’re experiencing any of these problems due to delinquency?

How can I recover from card delinquencies?

The answer to this question really depends on which stage of delinquency you are currently in. Let’s take a look by time frame:

30 Days Past Due - If you’re account is 30 days past due, your credit score will have been impacted but not too much. Contact your creditor and get up to date with your payments right away. Doing this will stop further damage to your credit and allow you to begin repairing your relationship with your creditor. Depending on your history, some creditors will even remove the late payment report from your credit report upon asking.
60 Days Past Due - At this point, you can still contact your creditor to make a payment and halt reporting to the credit agencies; however, it is possible that a penalty APR might have been implemented at this point. Speak to your creditor and see if anything can be done to redact the penalty APR once you’ve caught payments up. Most likely your creditor will not be willing to redact late payment reporting to the credit bureaus at this point; however, by catching up payments it will halt further negative points and potentially stop your score from dropping further. The negative reporting should be removed from your report after 7 years has passed.
90 Days Past Due - When you are 90 days past due on your credit account, typically your option for traditional payment options is no longer available. Contact your creditor right away to see what you can do to catch up the account. Often, creditors will be willing to work with you in order to create a payment plan to get you back on track. Most likely you will be unable to utilize any credit on your account during this process. Most likely your creditor will not be willing to redact late payment reporting to the credit bureaus at this point; however, by catching up payments it will halt further negative points and potentially stop your score from dropping further. The negative reporting should be removed from your report after 7 years has passed.
120 Days Past Due - Once you’ve reached this point, there is typically not much you can do to work things out with your creditor. Usually, at 120 days past due a creditor will have charged your account off and sold remaining debt to a debt collector. This does not mean you are out of options, however. Try to contact the company who purchased the debt and reach a payment or settlement agreement as soon as possible. This will allow you to halt negative reporting to your credit status and avoid potential litigation. Be sure to keep track of any payments and arrangements you make with a debt collector. Negative reporting will stay on your credit report for up to 7 years, however it should fall off at that point and help to increase your score.

Once you have settled your delinquent accounts, it is possible to begin credit repair sooner than the 7 year mark (when negative reporting will begin to fall off). Primarily, it’s essential that you continue to make ALL payments to all creditors on time. Building your on-time payment history back up again will have a lot to do with stabilizing your credit report.

If possible, try to pay balances off in full or at least pay more than the minimum payment on your debt; doing this will increase the amount of unused credit available to you and help to raise your score. You may also want to look into opening a new line of credit to increase your available credit amount; you will need to make sure to pay off any balances used on this account each month in full for this to make a difference, however.