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What To Do When You Have Delinquent Debt

Delinquent debt is any bill that remains unpaid past its due date.

delinquent debt
Updated July 9, 2024
Written by Rachel Alulis
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Key takeaways

  • A delinquent debt is any bill that is not paid by the due date.
  • Delinquent status can hurt your credit score and make borrowing more difficult in the future.
  • Proactive communication with lenders can help prevent accounts from becoming delinquent.

Delinquent debt can be scary and stressful, but don’t panic. Almost everyone ends up with delinquent debt at one point or another. What exactly does a delinquent account mean? A delinquent account is when you are late, even just by one day, in paying your bill.

Any time you borrow money, the lender gives you a deadline to pay it back. If you miss the deadline, you end up with a delinquent account. How much of a negative impact your missed payment has depends on how long the bill goes unpaid.

If you find yourself with an account in delinquent status, don’t ignore it. Learn what steps you can take to rid yourself of delinquency, avoid serious consequences, and get your finances back on track.

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What is delinquent debt?

Delinquent debt refers to any unpaid debt that remains outstanding past the payment deadline. This encompasses missed or overdue payments on any credit accounts, including a credit card account, personal loan, mortgage loan, student loan, or auto loan. A delinquent payment can significantly impact your credit score, making it harder to obtain new credit or future loans.

Delinquency comes with different repercussions depending on how late you are. Various consequences include late fees, higher interest rates, and even legal action if the debt remains unpaid. Learning what a delinquent account means can help you avoid the pitfalls of missed payments and help you take action before your financial situation worsens.

When is a borrower reported as delinquent?

The definition of a delinquent payment is any payment that is made past the due date. An account is considered delinquent as soon as a payment is missed, but the missed payment will typically not be reported to the credit bureaus right away. Most creditors offer a grace period of a few days to a few weeks during which the borrower can make the payment. The borrower may be charged a late fee, but that may even be waived depending on their payment history and how late the delinquent payment is.

The first delinquent payment notice is usually sent to the major credit bureaus after 30 days, affecting the borrower’s credit score. When exactly your payment is reported as delinquent varies by loan type. Lenders may report a delinquent loan to credit bureaus after 30 days of missed payments. This is also true with most mortgage lenders and credit card companies, but auto loans are generally reported after only 10 days. Federal student loans give borrowers up to 90 days before the loan payment is reported as delinquent.

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What happens after I’m considered delinquent?

When you first miss a payment, your lender will likely call or text you to remind you to pay your bill. They may also issue a late fee as a further incentive. As time passes, the calls will become more frequent and the consequences more severe.

Each creditor timeline is different, but here’s an idea of the consequences you can expect:

default payment

1-30 days past due

  • Potential late fees

30-60 days past due

  • Additional late fees or penalties
  • Late payments are reported to the national credit bureaus

60-90 days past due

  • Creditors send letters, phone calls, online alters, or emails
  • Impose a higher penalty APR on your credit card balances
  • Additional late fees or penalties
  • 90 days past-due notice on credit report

90-120 days past due

  • Certified letter demanding you bring your payments current
  • Account closed if credit card or personal loan and sent to a debt collection agency
  • Mortgage: Notice declaring they’ll initiate foreclosure in 30 days
  • Auto Loan: Notice of intention to repossess the vehicle (may happen sooner)
  • Reported to credit bureaus, further hurting your score

120-180 days past due

  • Debt collectors start to call frequently
  • If the debt is backed by collateral like your home or car, you are very close to losing it

How does a delinquent account affect your credit score?

Having a delinquency on your credit report can significantly lower your credit score. Payment history is the most important factor, making up 35% of your FICO score. Even one missed payment can lower your score by 50 to more than 100 points. The exact amount depends on your credit history. Typically, the higher your credit score, the more it will fall.

The longer the delinquency remains unresolved, the more detrimental the effects. At 60, 90, and 120 days past due, additional reports are sent to the credit bureaus, further decreasing your credit score. Each missed payment compounds the damage, making it harder for credit scores to recover quickly.

At 120 days past due, your account will likely be charged off and sold to a debt collection agency. A charge-off is a separate mark on your credit report and will further drive down your score.

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How long do delinquent payments stay on your credit report?

A delinquency remains on your credit report for up to seven years from the date of the first missed payment. It not only drags down your score but serves as a red flag to potential lenders and creditors. Over time, the negative effects on your credit score can diminish, and your score can improve if you use credit responsibly.

Other consequences of delinquent accounts

Persistent delinquency may result in your account being handed over to collections agencies, leading to frequent calls and letters demanding payment. Additionally, lenders might pursue legal action, resulting in potential wage garnishments or liens on your property. Addressing delinquent accounts promptly can help you avoid these broader negative impacts.

What should you do to remove delinquent accounts from your credit report?

Unfortunately, there is no guaranteed way to remove delinquent accounts from your credit report. If they are accurate, you will have to wait seven years for the negative marks to fall off your report. There are a few tricks you can try to get them removed from credit reports sooner than the seven-year mark.

One of the first things to try to fix delinquency on your credit report is to contact your lender. If your missed payment was a one-time thing, they may be willing to help you. Try to call them as soon as possible to avoid their reporting your late payment in the first place. See if you can work out a payment plan to bring your account back into good standing.

An effective way how to fix serious delinquency on your credit report is to request a goodwill adjustment or goodwill deletion once your account is paid in full. This is when the creditor removes the delinquency from your credit report. There is no guarantee this will work, but it doesn’t hurt to ask.

If it’s been seven years and you notice that the delinquency is still on your credit report, it’s time to get it off. Dispute the negative entry with the respective credit bureau to get it removed.

Delinquent vs. default: What’s the difference?

Delinquent and default are easily confused, but they mean different things. The delinquent definition in finance refers to a situation where a borrower has missed one or more payments on a loan or credit account.

Default, on the other hand, is a more severe status that occurs when a borrower fails to repay a debt for an extended period, often 90 to 180 days past due, depending on the lender’s policies. When an account defaults, the lender may consider the debt uncollectible and might charge off the account, sell it to a third debt collection agency elsewhere, or initiate legal proceedings to recover the owed amount.

While delinquency indicates a temporary lapse in payment, default signifies a long-term failure to meet financial obligations. Addressing delinquency promptly can prevent the account from slipping into default.

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How can you avoid delinquent accounts?

Stopping the problem before it starts is the best thing you can do for your financial wellbeing.

Talk to your lender before the payment date arrives

If you anticipate trouble making a payment, contact your lender before the due date. Most lenders appreciate proactive communication and may offer solutions such as adjusting the payment schedule, providing temporary forbearance, or restructuring the loan. Early communication can prevent your account from becoming delinquent and show your commitment to meeting your financial obligations.

Only borrow what you can afford

Before taking on new debt, carefully assess your ability to repay it. Consider your current financial obligations and how an additional monthly payment will impact your budget. Borrow only what you can comfortably afford to repay by the deadline. This cautious approach reduces the risk of missing payments and future delinquency.

Look at your budget

Look at your budget and see what expenses you can eliminate so that you can pay your bills on time. Perhaps you can cut back on streaming services or subscriptions. Take a look at your monthly expenses and adjust your budget to stay on top of your bills.

Sign up for credit counseling

A credit counselor can help you create a budget, develop a debt management plan, and even negotiate with creditors on your behalf. These organizations offer personalized advice tailored to your financial situation, helping you make informed decisions and avoid falling into debt. Look for reputable, non-profit credit counseling agencies for trustworthy assistance.

Read more about debt consolidation.

Build an emergency fund

If you have an emergency fund, use it to keep your accounts in good standing. Then replenish the money as soon as you can. Having an emergency fund can prevent you from missing payments or resorting to high-interest loans to borrow money during financial setbacks, thus avoiding delinquent accounts.

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What is an IRS interest rate on delinquency?

The IRS interest rate on delinquency applies to taxes that are not paid by the due date. This rate is determined quarterly and is calculated based on the federal short-term rate plus 3%. It’s now 0.5% of the tax you owe after the due date for each month the tax remains unpaid. The interest compounds daily, increasing the total amount owed over time. This interest rate is meant to encourage timely tax payments. To avoid accruing high interest charges, pay your taxes on time or set up a payment plan with the IRS if you anticipate difficulties in paying.

Bottom line

Making on time payments is essential for your credit score and maintaining financial health. Missed payments can drag down your score and make it harder to borrow in the future.

If you are facing a delinquent payment, act swiftly to mitigate the negative consequences. Contact your lender to explore options, address the overdue amount, and work towards bringing your account current. These actions can prevent further damage to your credit score and financial well-being.

Remember, the key to avoiding delinquent debt payments lies in proactive financial management and open communication with your creditors. By staying informed and taking deliberate steps to manage your debts, you can protect your credit score and achieve greater financial stability.

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About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

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