What is a Delinquent Payment?
Summary
A delinquent payment is a missed or late payment on a loan or credit account. Learn how it affects your credit and what to do if you've fallen behind.
In this article:
When you don’t make a loan or credit card payment by its due date, your lender may report it as a delinquent payment to credit bureaus.
A delinquent payment may have a negative impact on your credit score and make it harder to manage your debt. But delinquency is just a temporary setback as long as you take steps to get back on track.
When does a payment become delinquent?
When a payment becomes considered delinquent depends on the agreement you have with your lender. Some lenders might consider a payment delinquent as soon as you miss your due date (you can find your due date on your monthly statement). Other lenders may offer a grace period, which is a period of time after your due date during which the lender will accept a late payment before marking it as delinquent. For example, the lender might not consider the payment delinquent until a full billing cycle, which is typically 30 days, has passed and your next payment is due.1
There are different stages of delinquency and different consequences for each stage.2 Consequences may also depend on each lender’s policies and the type of debt.
- Less than 30 days past due: The lender will typically communicate with you right away about payment and may charge you a late fee.
- 30-60 days past due: The lender may reach out to you again and charge you another late fee or penalties. Your late payment will likely be reported to the three main credit bureaus (Equifax, Experian and TransUnion). If you have secured debt, which is backed by collateral (something of value you have, like a house or car), the lender may also start the repossession process to recoup their losses. The exact timing of a repossession will depend on your loan agreement.3
- 60-90 days past due: The lender may charge more fees and penalties and continue to communicate with you about payment. In some cases, they may offer you different options for payment plans. They will also continue to report the delinquency to the credit bureaus.
- 90-120 days past due: Most lenders would consider your account in default at this stage, meaning you haven’t met your legal or contractual obligations. They’ll generally report the default to the credit bureaus.
- 120+ days past due: The lender may decide to close your account and write off the debt as a loss, known as a charge-off, which could further damage your credit score.4 Even after a charge-off, you’re still legally responsible for the debt. The lender may use a debt collection agency to try to recover their funds, which could result in legal action. Whether or not you pay the debt collector what you owe, or if you settle the claim, the collection activity will be noted on your credit report for seven years.5
How long do delinquent payments stay on your credit report?
A delinquent payment’s impact on your credit score increases as more billing periods go by. You may notice a significant drop after 90 days without payment.6 Delinquencies may stay on your credit report for up to seven years after the initial missed payment is reported, even if you get caught up or pay off the debt. But there’s good news — a late payment’s effect on your credit score usually fades over those seven years, provided you make on time payments in the meantime.7
How to recover from a delinquent payment
Acting quickly is key to getting back on track after a delinquent payment.
Make the delinquent payment as soon as possible
When you miss a payment or two, it’s often easy to panic and freeze up. But if you are able to catch up on payments, paying what you owe as soon as possible is the easiest way to minimize the harm of delinquency. Even partially repaying what you owe may be better than not paying at all.
Contact your lender
Reach out to your lender, bank, credit union or credit card issuer to discuss your options right away. Your lender may waive the late fee for your first missed payment. Or, if you’re struggling to catch up, your lender might offer alternative payment plans.
Get help if necessary
You don’t have to face your delinquency alone. If you find it challenging to stay on top of your debt, consider working with a nonprofit credit counselor to develop a debt management plan, which may help you pay off debts at a lower interest rate.8
Work with the debt collector
If your missed payments have gone to a debt collector, you may be able to work out a payment plan with them. In some cases, they may even offer you an opportunity to settle the debt for less than you owe, though doing so may affect your credit score and carry tax implications.9
Check your credit report regularly
After you’ve caught up on payments, check your credit report and score for any changes. Regularly reviewing your credit report may help you identify patterns and notice hiccups early, which may benefit your financial health moving forward.
How to prevent delinquent payments
A delinquent payment could happen to anyone, but the following strategies may help you avoid falling behind.
- Review your budget: Make sure your budget includes your monthly debt payments, such as personal loan, auto loan, mortgage, student loan and credit card bills in addition to your necessary living expenses, such as housing costs, groceries and utilities.
- Schedule payments wisely: Some lenders may let you change your monthly due date or let you pay smaller amounts weekly or biweekly instead. Consider spreading your bills across pay periods or scheduling payments right after payday.
- Set reminders: Set up payment reminder alerts in your banking app, email or personal calendar to remind you of upcoming bills a few days in advance.
- Enroll in automatic payments: You may avoid missing payments by scheduling automatic withdrawals from your bank account. Just make sure you have the money in your account for each transaction.
Delinquent payments don’t define you
If you find yourself falling behind due to delinquent payments or even defaulting on a debt, don’t get discouraged. Reach out to your lender as soon as possible to work together on a solution. Proactive steps are key to getting over this hurdle, so you can move forward.
Sources
1, 2: https://www.bankrate.com/personal-finance/debt/what-is-a-delinquent-account/
3. https://consumer.ftc.gov/articles/vehicle-repossession
4: https://www.experian.com/blogs/ask-experian/what-is-a-charge-off/
5, 6, 7: https://www.experian.com/blogs/ask-experian/when-does-debt-become-delinquent
8. https://www.bankrate.com/personal-finance/debt/best-debt-management-programs/
9. https://www.bankrate.com/credit-cards/advice/how-to-recover-from-credit-card-delinquency/#recovering
This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.
