Each year, millions of people find themselves in situations where they can’t pay their bills. Creditors are used to this and have procedures in place to deal with it. Generally, the longer a bill goes unpaid, the more severe their actions will be. However, even if bills are only one day late, the consequences can be significant. While creditors may choose to be more or less aggressive with how they pursue delinquent accounts, read on to learn some of their most common tactics and timing. If you have specific questions for a creditor of yours, be sure to ask them directly how they handle late payments and delinquent accounts.
The First 30 Days
During the first 30 days that you’re late to pay a bill, the creditor (the financial institution or company to whom payment is owed) can do a number of things. They often begin by sending payment reminders or by calling or emailing to find out where the payment is and give you the opportunity to make a payment over the phone. The penalty for paying late may be in the form of a late fee. Sometimes, they increase the interest rate on credit cards, or turn off the ability to use the card until the payment is made. Frequently, though, the creditor won’t report the late payment to the credit bureaus until the payment is more than 30 days late. This means that as long as you get your bill current before the reporting date, your late payment won’t go on your credit report.
Over 30 Days
Once your payment is late by more than 30 days, it becomes more serious. The creditor may call more often and send more emails and additional notices of late payment in the mail. At that time, the creditor is likely to start reporting your late payment, meaning that you’ll probably see a decrease in your three bureau credit scores if you check your credit report. Furthermore, anything your creditor reports will stay on your credit report for seven years. Most creditors keep trying to collect your debt for at least a few months beyond when you are 30 days late. They may even offer you an installment plan or accept a partial payment to bring your account current.
At some point, creditors give up trying to collect from you. When this happens, they send your account to a collection agency. Collection agencies use the same tactics as your creditors — usually calling and mailing you — but can go farther. It’s not uncommon for them to call multiple times per day. They may also attempt to talk to people who know you in attempts to get those people to tell you to call them. It is possible to work out an arrangement with the collection agency where they accept a partial payment of the debt to settle and close the account.
If the collector doesn’t think it will get the payment through the usual methods, you can be sued. Collectors can sue you in small-claims or district court. If you don’t respond to the lawsuit, or if you can’t prove that you don’t owe the debt (which you should do much earlier in the process if you think you’ve been the victim of fraud), they can enter a judgment against you. The judgment goes on your credit report for at least seven years from the date of the lawsuit and also gives the creditor the right to collect from you by placing liens on your property or bank accounts, or by having your employer send a portion of your paycheck directly to them, which is called a garnishment, until the judgment is paid off.
About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Lander holds a Bachelor of Arts in political science from Columbia University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.