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.
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.
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.
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."
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,
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 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
"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."