What To Do When You Have Delinquent Debt
If you’re just a day late paying back a debt, your lender will consider you delinquent. Depending on how long your account remains unpaid, you could face negative impacts to your credit score, late fees, APR penalties — and even legal action.
If you’re delinquent, don’t panic — but don’t ignore it, either. Learn what to do when you have delinquent debt and the steps you can take to rid yourself of delinquency once and for all.
What is delinquent debt?
Delinquent debt is any debt that wasn’t paid by its due date. But being delinquent doesn’t necessarily mean you’re in trouble — at least, not right away.
Most lenders offer a grace period, or a stretch of time where you can catch up on your payments without serious repercussions. Lenders might issue a late fee during the grace period, but if you have a solid payment history and can bring your account back to current, they may be willing to waive it — if you ask.
If you fail to make a payment for 30 days or more, your lender will probably report the delinquency to the credit bureaus. This is when you’ll start to see negative impacts to your credit score.
When will I be reported as delinquent?
The length of your grace period (or whether you get one at all) depends on your lender’s policies and the type of loan you have. Here are some general guidelines of when delinquent debt may be reported to the credit bureaus and when you could expect default. Still, check your loan contract for more detailed information.
| Type of loan | Days until delinquency is reported | Days until default |
|---|---|---|
| Mortgage | 30 | Varies, but 30 or more |
| Private student loan | Varies by lender | Varies by lender, but typically 90 |
| Federal student loan* | 90 | 270 |
| Credit card | 30 | 180 |
| Auto loan | 10 | 1 to 90 |
* For Direct Loans and Federal Family Education Loans (FFEL)
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 time passes, 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.
Each lender responds differently at each stage of delinquency, and each issues varying fees. If your credit card account is delinquent, you could also be slammed with a higher interest rate (sometimes as high as 30%) due to a penalty APR.
If your account remains delinquent, you’ll end up defaulting. It’s easy to get delinquency and default confused, but they’re not the same. Default is the eventual result of allowing your delinquent account to remain unpaid over an extended period.
Although each borrower’s situation is unique, here’s a timeline of what you may expect if you have delinquent debt:
| 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?
Your payment history is the most significant factor that goes into calculating your credit score, accounting for 35% of your total score. Just one missed payment can drop your credit score from 50 to more than 100 points. What’s more, that delinquent account will remain a black mark on your report for up to seven years from the date you first missed the payment, even after you pay it off in full.
Generally, the higher your credit score, the bigger the impact a delinquent account will have. That’s because the credit bureaus already consider borrowers with lower scores as higher risk. On the other hand, a newly delinquent account for an excellent-credit borrower may be the first sign of additional credit-related issues to come.
If your bill remains unpaid and you default on your loan, your original lender will “charge-off” your debt and sell it to a third-party debt collection agency. This process takes the lender out of the equation. Instead, you’ll deal directly with the debt collector.
Charge-offs appear on your credit report as a separate action 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.
In any case, your lender won’t know that you’re struggling unless you tell them. Just be sure to let them know early on — the deeper you are into delinquency, the fewer options you’ll have.
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 when inflation is high. 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. You’ll also likely need 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.
Maybe, but it depends on the lender and your overall creditworthiness. A delinquency will certainly 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.