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Learn how to lock down delinquent credit card debt so it doesn’t get out of control in collections and start causing problems for your budget.
Although you try to be as responsible as possible with your debt, sometimes things can just get away from you. Whether you have delinquent accounts because of the recession, because you used credit irresponsibly, or maybe you just dropped the ball this one time, it all ends up the same way—delinquent accounts hurt your credit and hinder your ability to be financially stable.
No matter how you reached this point, the really important thing is what steps you are going to take to get out. But you need to understand the types of debts that you have and how “delinquent” they really are.
Fact: A creditcards.com survey showed 59% of consumers pay credit card bills last when money is tight
So how do you deal with delinquent accounts successfully and how do you handle any fallout on your credit?
Delinquent accounts come in more than one form, so your first step to dealing with the issues successfully is to determine just how delinquent that debt is. The key point of distinction is whether or not your delinquent account is designated as a charge-off.
Creditors move accounts to a charge-off status when the bill hasn’t been paid.. Charge-off means the account is frozen, but there is still an outstanding balance owed that the creditor wants to recoup.
Although it can differ from creditor to creditor, most charge off an account that is over 180 days (6 months) delinquent. Effectively, this means you have about six months from the date of your first late or missed payment to bring the account current before the creditor lists the account in charge-off status.
So if you can handle a past-due debt within the first six months, it doesn’t get sent to collections – it’s just late. On the other hand, any debt older than six months in usually charged off and sent to collections. At this point, your rights are protected by the FDCPA.
If one of your accounts is delinquent, you will talk to one of three people when you attempt to arrange payment:
So on a past-due account, you’re likely to have more wiggle room to negotiate so you can get back on track; however, the creditor is the one who gets to set the dialogue. Once the debt goes to a collector – whether it’s within the company or a third-party provider – then you can’t negotiate as much, but you can at least set the tone for the conversation under the FDCPA.
If you are late, miss a payment, pay less than the requested amount due, or go over your credit limit, your creditor will change your account status to “delinquent”; this status change gets reported to the three main credit bureaus so it will be reflected on your credit report.
During this time, it’s important to talk with any representatives of your creditor, even if you cannot pay. At this point a creditor is more willing to listen to you and help you work around any circumstances that could be preventing you from paying. They may even arrange a temporary adjusted payment schedule if you are having trouble. Avoiding calls from your creditor is an easy way to get sent to collections. It can also mean harsher credit penalties.
After 180 days (6 months), the creditor will change your account status to charge-off and send it to a collector. The collections practices must now adhere to FDCPA guidelines. At any point if the collector (third-party or one that works for the creditor) abuses your rights, then you have a case for collections harassment.
Article last modified on May 21, 2019. Published by Debt.com, LLC . Mobile users may also access the AMP Version: - AMP.