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Credit card delinquency: After 30 days, damage is done

A credit card issuer might cut you some slack for being a couple days late on a bill. You may even be able to talk your way out of a $29 late fee.

But, once you're 30 days late on a bill, things can get a lot more serious. Brace yourself for some harsh fees and penalty rates. A black mark may even appear on your credit report where it will stay for the next seven years.

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Your issuer is getting nervous.

"They're worried at that time that you're not going to pay at all," says John Hall, a spokesman for the American Bankers Association.

The Scarlet "D"
Once you hit 30 days without paying that Visa or MasterCard bill, your account goes from simply being late to delinquent.

"You're in a totally different category," says Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla.

Some issuers automatically report delinquent credit card accounts to the credit bureaus. Others wait until payments are 60 days late to black-mark someone's credit report.

Being marked as a late payer by a creditor can really bruise your credit score.

"It's a biggie, you bet," says Craig Watts, consumer affairs manager for Fair, Isaac and Co. based in San Rafael, Calif. "Your payment record accounts for one-third of your credit score."

The more recent the late payment, the more damage it does to your credit score. The lower your credit score is, the more you'll end up paying for credit.

Pay late, pay more
Once a creditor tags you as a late payer, you can expect to pay higher interest rates for auto and home loans.

Your credit card issuer may slap you with a penalty interest rate for being late on your account. Some credit card issuers will jack up a customer's interest rate if they fall behind on any credit account. So a slip-up on one credit card account could result in higher rates on all your cards.

Remember, once a late payment is reported to a credit bureau it will stay on a person's credit report for seven years.

"Even if you close the account and you pay off the debt, it's still going to stay," Watts says. "A lot of consumers aren't aware of that. They think if they've closed the account they've erased that black mark from their credit and in fact it stays with them."

Reach out to your issuer
The best way to avoid getting marked as a late payer is to contact your issuer before you fall behind on your bills. Tell them what's going on in your life and why you're not going to be able to make your monthly payment.

"If you call, they'll be more understanding. The more information they have the better," Hall says. "They'll treat you as a person instead of a number."

You may be able to negotiate a revised payment schedule with the issuer.

"There are things banks can do. They can lower the monthly payment temporarily so you can get over the hump," Hall says.

The sooner you call an issuer the better. Be honest about your situation. If you're having a temporary cash flow crunch, say so. If you've lost a job or been in an accident, say so.

Be realistic about when you'll be able to make your payments in full.

"Don't make commitments you won't be able to keep," Dvorkin says. "Don't just say anything to get them off the phone."

The cost of procrastination
The longer you let a bill go unpaid, the less leverage you'll have when talking to an issuer. It won't matter much that you've been a customer for 10 years, if you haven't paid your bill in two months.

"Unfortunately, banks aren't what they used to be. The loyalty has dissipated over the years," Dvorkin says. "It's more what have you done for me lately."

Falling more than 30 days behind on a bill is definitely a bad thing. But it won't wreck your credit score. Developing a pattern of paying late will.

If you find yourself falling behind on a number of bills, it may be time to visit a credit counseling center. A credit counselor can assess your financial situation, help you develop a budget and negotiate new payment schedules with creditors on your behalf.

As difficult as it may be to call an issuer or visit a credit counselor, the sooner you do the better off you'll be.

"You need to do something because things won't get better on their own," Dvorkin says. "If you're 30 days or over, do it quickly. Don't put it off."


-- Posted: Feb. 4, 2002




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