All About Credit Card Delinquency

Even though credit card delinquency has become increasingly common during the past several years, most consumers’ understanding of it continues to be lacking.

Too many of us don’t know how to avoid or solve this personal financial challenge!

The good news is that once you gain a more complete knowledge of delinquency, dealing with it is relatively straightforward.

When Do You Become Delinquent?

What exactly is credit card delinquency? A credit card customer is delinquent when he fails to make at the least the minimum credit card payment. Delinquency is separated into degrees that indicate how many payments have been missed. These ranges are often referenced in terms of days.

For example, on the day after the first payment is missed, the holder is one day delinquent. After you miss a second payment, the account is deemed to be 30 days delinquent and so on.

Theoretically, a credit card holder is delinquent after just one missed monthly payment. On the other hand, delinquency is commonly not reported to the credit bureaus until after two payments in a row have been missed.

What Are The Effects Of Delinquency?

Being reported delinquent to the credit bureaus most certainly has a negative impact on credit scores.

Scores could drop as much as 125 points with three consecutive missed payments. Once four payments have been missed, the impact on the credit score is more severe and the account is likely to be sent to collections. Legal action against the cardholder is a real possibility at this point.

How Do You Get Out Of Delinquency?

There is a way to stop and get out of delinquency. Making a single minimum payment ends the progression of the delinquency and keeps the account at the current level of delinquency.

This is crucial, simply because being reported to the credit bureaus 120 days late is much worse than being 90 days late. Making even one minimum payment can be an effective strategy to keep things from progressing too far.

Once you start trying to make up your past due payments, be careful to avoid these damaging errors:

  1. Making less than the minimum payment. Unfortunately, making a payment that is less than the minimum doesn’t have any effect on the delinquency. So, when you make a small payment, it really doesn’t help the situation. This error can easily be avoided; just be sure to only make payments that are greater than or equal to the minimum payment.
  2. Making only one minimum payment. Frequently, consumers mistake the minimum required payment with the total amount due.
    • The total amount due is the amount that needs to be paid in order to bring the account current. This amount usually consists of several minimum payments, so it’s important to continue making extra payments until the account has been brought current.

Credit Repair After Delinquency

As soon as the account is current, you can start negating the consequences of the delinquency. The more the negative information is covered up with positive information, the less impact the delinquency will have.

Secured credit cards are especially apt for credit betterment. These cards require a deposit to open, and the cards are always approved for this reason. Since the risk is minimal for the credit card company, the fees can be less. Whenever you decide to cancel the card, the deposit is returned.

While credit card delinquency cannot be recovered from overnight, it is possible to suffer no lasting effects in the long-term. Once the delinquency has been rectified, the negative history can be diluted as much as possible.

The key is to be patient and acquire a secured credit card. Using that new card wisely will allow you to be trusted by lenders again. Credit card delinquency is a challenge, but it is a challenge that can be dealt with successfully.

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