A significant reduction in your income could lead to an unplanned budget revision. This could involve paying your credit card bills after you cover your rent or mortgage. Unfortunately, an inability to meet your credit card obligations on time may result in a delinquent account, which differs from defaulting, as noted by Bankrate.com.
If you find yourself a few days late on a credit card payment, the card issuer may consider your account “late.” You may not find a negative mark on your credit report, but your next billing statement may include a late fee.
How does a delinquency affect my credit?
After 30 days of nonpayment, your account may become delinquent. Your card’s issuer may report a missed payment to the major credit bureaus. As reported by CNBC, a 30-day missed payment results in a 20-point decrease in your credit score. A 90-day missed payment could lead to another 20-point drop.
You may reverse the reduction in your score by paying any past-due balances plus late fees or other penalties. Your account may remain “delinquent” until you catch up on missed payments. Approximately 35% of your score depends on timely payments. You may increase your score if you can begin making on-time payments again.
How long until an account goes into default?
Accounts generally enter “default” status when payments have stopped for six months. You may receive phone calls or collection letters from your card issuer asking you to update your account. When it appears that you will not catch up on missed payments, your credit card issuer may charge off the account.
Charged-off credit card accounts may require you to consider options, such as a bankruptcy petition, to avoid facing a lawsuit. If you do not foresee your finances improving in the near future, you may file a petition to handle unmanageable debts.
