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Finding solutions to stop credit score damage caused by delinquent credit card debt.
Delinquent credit card debt is stressful for you and disastrous for your credit. Each month a balance remains delinquent, it damages your credit score. This guide explains how credit card delinquency works and what you can do to overcome it.
Credit card delinquency happens when you don’t make the minimum required payment on your credit card by the due date. Delinquent credit card debt is just a fancy name for past-due debt or overdue debt. It basically means that you’re behind and you need to catch up.
The impact of past-due credit card debt gets worse the longer the balance remains delinquent. A balance that’s only a few days overdue will only have a minimal impact on your finances in the form of late fees. But a balance left unpaid for more than 30 days will start to affect your credit. Here’s how it works:
Although creditors offer some leniency when you’re late initially, once they start reporting credit card delinquency to the credit bureaus, you end up in a hole. And digging out of that hole can be tough, especially when your finances are already distressed.
In order to stop past-due credit card debt from appearing as negative information on your credit history, you must pay the full delinquent amount to bring your account current. In other words, once you’re behind your credit history will stay behind until you catch up. Even if you make a payment, it won’t show that you did in your credit history. It will still show as delinquent.
This can have a huge negative impact on your credit score. Every month where the payment is listed as delinquent will ding your score. So, month after month, your credit score will take damage until you catch up.
If the financial hardship you faced was only temporary, then you need to make catchup payments. This involves paying as much of the delinquent balance on the line of credit as quickly as possible. For example, if your account became past due because you lost your job, once you get a new job you need to dedicate as much money as you can to bringing your account current.
If the financial hardship you’re facing is more long-term or caused by budget issues, then you may need to take more aggressive measures to catch up. The first thing you should do is call a nonprofit consumer credit counseling agency. This is a free service that can help you identify the best way to get out of debt for your unique financial situation.
Credit card delinquency rates peaked at the height of the Great Recession in 2009. The rate topped out at 6.77 percent. Then it fell to a low of 2.15 percent in the first quarter of 2015. Since then, credit card delinquency rates have been gradually increasing. This is one reason that some economist fear we may be headed for another economic downturn.
Article last modified on August 7, 2019. Published by Debt.com, LLC