Delinquency

What is Delinquency?

A delinquency occurs when a borrower fails to make a scheduled payment on a
credit account by its due date. Lenders typically classify an account as
delinquent once a payment is at least 30 days past due, though the exact
threshold may vary depending on the type of loan and the lender’s policies.
Common accounts that can become delinquent include credit cards, auto loans,
mortgages, and student loans.

Why Delinquency Matters for Your Credit

Delinquencies can have a significant impact on your credit score. Once a
lender reports a missed payment to the credit bureaus, generally after 30
days, it may appear on your credit report and lower your score. The more
severe the delinquency, meaning the longer the payment remains unpaid, the
greater the potential damage. Lenders and creditors reviewing your report may
view delinquencies as a sign of financial risk, which could affect your
ability to qualify for new credit or result in higher interest rates.

Under federal law, a delinquency may remain on your credit report for up to
seven years from the date of the original missed payment. However, the
negative effect on your score typically lessens over time, especially as you
build a consistent record of on-time payments going forward.

A Practical Example

Suppose your credit card payment is due on the 1st of each month. If you miss
the payment and do not bring the account current by the 30th of that month,
your lender may report the account as 30 days delinquent to the credit
bureaus. If the balance remains unpaid, it could then be reported as 60 or 90
days delinquent in subsequent months, each step generally causing additional
harm to your credit profile.

If you find yourself struggling to make payments, reaching out to your lender
early is generally advisable. Many creditors offer hardship programs or
payment arrangements that may help you avoid a delinquency being reported.

Sources

• Consumer Financial Protection Bureau (CFPB). “What is a credit report?”
  consumerfinance.gov
• Consumer Financial Protection Bureau (CFPB). “How do I dispute an error on
  my credit report?”
  consumerfinance.gov