Dealing with Delinquent Credit Cards[yoast-breadcrumb]
Dealing With Delinquent Credit Cards
Falling behind on your credit card payments can be scary. Your first reaction might be to ignore the problem and hope it goes away. But that only makes things worse!The best thing to do is face the issue head-on. Here’s my advice on dealing with delinquent credit cards so you can get back on track.
First Steps When You Miss a Payment
If you miss a credit card payment, act fast! As soon as you realize you’ve missed the due date, contact your credit card company. Let them know what happened and when you can make a payment.Most credit card companies are willing to work with you, especially if it’s your first late payment. They might waive the late fee if you pay promptly. But you have to reach out to them – they won’t come to you.Next, figure out why you missed the payment in the first place. Did you forget? Was money tight that month? Identifying the root cause can help you prevent it from happening again.Finally, make a payment as soon as possible. Even if it’s a partial payment, it shows good faith. The longer you wait, the worse it gets.
How Delinquency Affects You
Once your account becomes 30 days past due, it’s considered delinquent and can be reported to the credit bureaus. This damages your credit score.You’ll also face late fees, penalty APRs, and potentially account closure. The credit card company will suspend your charging privileges until the balance is paid.Delinquent accounts stay on your credit report for 7 years. But you can recover if you consistently make on-time payments going forward. Time really does heal all wounds when it comes to credit!
Creating a Plan to Get Current
If money’s tight, getting current on a delinquent account may seem impossible. But there are options to explore:
- Call the credit card company and explain your situation. They might have hardship programs or be able to offer a reduced settlement amount.
- Consider balance transfer offers from other credit cards. This can help lower your interest rate.
- Look into nonprofit credit counseling services that provide guidance on managing debt. They may be able to negotiate with creditors on your behalf.
- As a last resort, consider debt settlement or bankruptcy. The impact on your credit will be severe, but may be necessary if you have no other options.
The key is having an open dialogue with creditors and exhausting every option before making drastic decisions. Even small payments show good faith effort.
Avoiding Delinquency in the Future
Once you’ve got your delinquent account settled, it’s time to make sure it doesn’t happen again! Here are some tips:
- Automate payments so you never miss a due date. Even set up alerts for peace of mind.
- Pay more than the minimum when possible to pay down balances faster.
- Review statements regularly to catch fraudulent charges early. Dispute these immediately.
- Don’t bite off more than you can chew. Open new accounts sparingly and keep credit utilization low.
- Build an emergency fund with 3-6 months’ expenses so you have a buffer if money gets tight.
- Monitor your credit report and score regularly so you can address issues quickly.
- Learn from the experience and adjust your financial habits accordingly. Don’t let history repeat itself.
Options Once an Account is Charged Off
If you are unable to get your delinquent account current, the credit card company will eventually “charge off” the account. This means they give up on collecting payment and take a tax write off for the lost debt.But don’t think you’re off the hook! The creditor will often sell the debt to a collection agency for pennies on the dollar. The agency then hounds you to collect.If you want to resolve a charged off account, you can:
- Negotiate a settlement with the collection agency. Usually you can settle for 20-50% of the balance. Get any agreement in writing before paying.
- Wait out the statute of limitations. Debt collectors can only sue for a limited time, usually 3-6 years. The debt still impacts your credit report though.
- File for bankruptcy. This eliminates most debts entirely but severely damages your credit for 7-10 years.
- Dispute invalid debts. Sometimes collection agencies pursue the wrong person or inflate account balances. Dispute these inaccuracies.
- Simply refuse to pay. The collection agency might give up, but they can still ding your credit. Tread carefully.
As messy as charge offs and collections can be, staying communicative and exploring all options gives you the best shot at resolution. Don’t let fear and shame prevent you from taking action.
Dealing with delinquent credit cards is never fun, but following the right steps can help you bounce back. Contact your creditors, come up with a payment plan, adjust your financial habits going forward, and monitor your credit closely.With time and perseverance, even serious delinquencies can be overcome. Don’t lose hope! Stay focused on the end goal of becoming current and rebuilding your credit.