How to recover from credit card delinquency

Many of us have missed a credit card payment before, either by accident or because we were waiting on a paycheck to come through. This type of credit card delinquency is easy to resolve and might not even affect your credit score — but if you let your credit card bills go unpaid for months, you run the risk of developing the kind of credit card delinquency that could significantly damage your credit or even get you sued.

While it’s relatively easy to recover from a minor credit card delinquency, there is a high cost to ignoring your credit card bills over an extended period of time. Your credit account could be closed and charged off, your debt could be sent to collections and your wages could be garnished. Plus, you’ll end up with a derogatory mark on your credit report that might stick around for up to seven years.

This guide breaks down the ins and outs of credit card delinquency, as well as what to do when you find yourself in this situation.

What is credit card delinquency?

If your credit card payment is overdue, your account is considered delinquent. Most credit card companies do not report a delinquent credit account to the credit bureaus until your payment is over 30 days late — so if you catch your delinquent credit card bill in time and make a payment, your overdue bill won’t have a negative effect on your credit score.

If your credit account remains delinquent for 60 days, however, then that information will be reported to the credit bureaus and will negatively impact your payment history, which is the most important factor in your FICO credit score. Not only will your credit score be affected, but your credit card issuer may also raise your interest to the penalty APR rate, which is often quite high at around 29.99 percent.

If your account remains delinquent for 90 days or more, your lender may decide to close your credit card account and send your debt to collections. Your account may also be charged off, which would appear as a derogatory mark on your credit report that severely damages your credit score.

Steps to recovering from credit card delinquency

If your credit card account is delinquent, there’s no need to panic. Follow these step to bring your account out of delinquency:

1. Start making payments immediately. If your credit account has been delinquent for more than 30 days, you need to prioritize making payments — ideally at least the minimum amount due — as quickly as possible. Many people have trouble paying off credit card debt, especially when it has started to spiral out of control — but the sooner you can start making payments, the sooner you’ll get out of delinquency and back on track.
2. Contact your credit card issuer. Many lenders have hardship programs designed to assist consumers who are experiencing financial difficulties. You may be able to get your monthly payment reduced, for example, or you may request a credit card forbearance plan that will allow you to postpone payments for a period of time.
3. Contact a non-profit credit counselor. A credit counseling agency may be able to help you create a debt management plan (DMP) with your card issuer that includes a lower monthly payment, and perhaps a lower interest rate. Note that you may be required to close your credit card account if you go this route.
4. Work out a payment plan with the debt collection agency. If your delinquent credit card debt has already gone to collections, you can also contact the debt collection agency directly and try to work out a payment plan. You may even be able to negotiate a debt settlement that allows you to resolve your debt by paying off the majority of your balance in a lump sum payment. However, settling a debt for less than you initially agreed to pay can harm your credit score. A credit counselor can advise you on this step and help you decide whether a DMP or debt settlement might make more sense for you.

Steps to take after your account is no longer delinquent

Once you’ve gotten your credit card account out of delinquency, it’s time to focus on keeping it out of delinquency and rebuilding your credit score if necessary. These steps can help:

Change your habits surrounding credit card usage

The best way to go about moving on after delinquency is by taking a closer look at your overall credit habits. In order to avoid falling into an endless cycle, establish more diligent credit habits. Consider the following tips to help you avoid credit card delinquency in the future:

• Set up autopay: If you’re managing multiple credit cards at once, remembering when to pay your credit card bill each month can be mind boggling. In order to avoid missing payments and possibly facing late fees or a penalty APR, consider setting up automatic payments. With autopay, you don’t have to worry about falling behind on your payments because your balance (or minimum payment) will be sent automatically.
• Stop spending on your credit card: If you are worried about digging too big of a hole with a specific credit card, put it away temporarily. Catching up on payments and remaining consistent with your credit card bills will be significantly easier if you aren’t adding to your debt. Put your credit card in your sock drawer and rely on debit for the time being.
• Communicate with your issuer: If you are worried about falling behind on a credit card payment, call your issuer and see how they can help you. For example, they may be able to negotiate a payment plan that lowers your monthly payments. At the end of the day, it never hurts to ask.

Try to remove the delinquency marks from your credit report

If you have a delinquent credit card debt that has not yet been charged off or sent to collections, making timely debt payments is the best way to reduce the impact of the delinquency on your credit score. Your credit report will still show that you missed a few payments, but a strong history of on-time payments can overcome a brief period of delinquency.

Negative credit report items such as missed payments and collection accounts typically fall off your report after seven years. If old debt has not fallen off your credit report after seven years, contact the three major credit bureaus (Equifax, Experian and TransUnion) and request that they remove the delinquent debt from your credit report.

You may also have a delinquent debt on your credit report that is not actually yours, which is why it is important to request copies of your credit reports regularly and dispute any errors you find. If your credit report includes a delinquent debt that you don’t recognize, get the debt removed as quickly as possible. That way you can maintain the credit report — and credit score — that you deserve.

The bottom line

Credit card delinquency can leave a long-term negative mark on your credit report, but it can be avoided with the right financial habits. If you are facing delinquency or recovering from a recent run-in with it, establishing a sound plan for using credit responsibly will help you keep it from happening again.

Don’t forget — you also have plenty of resources at your disposal. You can ask about your credit card issuer’s hardship programs and even work with a certified credit counselor to come up with a debt management plan. If your credit score is high enough, you can also look into transferring your debt to a card with a good introductory APR offer. This will allow you to catch up on your payments without paying interest — provided you pay everything off before the end of your intro APR period.

Frequently asked question (FAQs) about credit card delinquency

• How can I check if my credit card bill is delinquent?

  If you want to know whether your credit card bill is delinquent, log into your online account or call the customer service number on the back of your credit card. You’ll be able to check your payment history and confirm whether or not you have any overdue bills. Your lender will also contact you — by mail, email, text or mobile alert — when you are late on a payment, so you may already have received notification of a potential credit card delinquency.

  If you discover that your credit card bill is delinquent, make a payment as quickly as possible. If this is your first delinquency and you are less than 30 days late, you may even be able to contact your credit card issuer and get your late fee removed.

• Is my credit card still usable during delinquency?

  During the early days of a credit card delinquency, you are still able to use your credit card. Keep in mind that if your delinquency extends past 60 days and your credit issuer applies a penalty APR, you’ll be stuck paying higher interest rates on both your outstanding balance and any new purchases you charge to your card.

  If the debt delinquency timeline continues beyond four months, your bank or credit card issuer may close or cancel your credit account. This means you will no longer be able to use your credit card to make purchases — but you’ll still be responsible for paying off your unpaid debt.

• Will paying off collections recover my credit score?

  Paying off your debt is always helpful when it comes to your credit score, but you might not see immediate changes to your score when you do so. If your debt has been sent to a collections agency, paying it off may immediately raise your credit score, depending on which scoring model is being used. Newer scoring models like FICO 9 ignore paid off collections, but older formulas such as FICO 8 do not. In the latter case, your score may still remain low after you pay it off until you establish a positive payment history again.