Docstoc

All About Credit Card Delinquency

Document Sample
All About Credit Card Delinquency Powered By Docstoc
					           ALL ABOUT CREDIT
            CARD DELINQUENCY

All About Credit Card Delinquency


Even though credit card delinquency has become increasingly common during the
past several years, most consumers' understanding of it continues to be lacking.


Too many of us don’t know how to avoid or solve this personal financial challenge!


The good news is that once you gain a more complete knowledge of delinquency,
dealing with it is relatively straightforward.


When Do You Become Delinquent?


What exactly is credit card delinquency? A credit card customer is delinquent when
he fails to make at the least the minimum credit card payment. Delinquency is
separated into degrees that indicate how many payments have been missed. These
ranges are often referenced in terms of days.


For example, on the day after the first payment is missed, the holder is one day
delinquent. After you miss a second payment, the account is deemed to be 30 days
delinquent and so on.


Theoretically, a credit card holder is delinquent after just one missed monthly payment.
On the other hand, delinquency is commonly not reported to the credit bureaus until
after two payments in a row have been missed.


What Are The Effects Of Delinquency?


Being reported delinquent to the credit bureaus most certainly has a negative impact
on credit scores.




                                         1
Scores could drop as much as 125 points with three consecutive missed payments.
Once four payments have been missed, the impact on the credit score is more severe
and the account is likely to be sent to collections. Legal action against the cardholder
is a real possibility at this point.


How Do You Get Out Of Delinquency?


There is a way to stop and get out of delinquency. Making a single minimum payment
ends the progression of the delinquency and keeps the account at the current level of
delinquency.

This is crucial, simply because being reported to the credit bureaus 120 days late is
much worse than being 90 days late. Making even one minimum payment can be an
effective strategy to keep things from progressing too far.


Once you start trying to make up your past due payments, be careful to avoid these
damaging errors:


   1. Making less than the minimum payment. Unfortunately, making a payment
      that is less than the minimum doesn’t have any effect on the delinquency. So,
      when you make a small payment, it really doesn't help the situation. This error
      can easily be avoided; just be sure to only make payments that are greater than
      or equal to the minimum payment.

   2. Making only one minimum payment. Frequently, consumers mistake the
      minimum required payment with the total amount due.

           The total amount due is the amount that needs to be paid in order to bring
           the account current. This amount usually consists of several minimum
           payments, so it’s important to continue making extra payments until the
           account has been brought current.



Credit Repair After Delinquency


As soon as the account is current, you can start negating the consequences of the


                                         2
                                   delinquency. The more the negative information is covered up with positive
                                   information, the less impact the delinquency will have.


                                   Secured credit cards are especially apt for credit betterment. These cards require a
                                   deposit to open, and the cards are always approved for this reason. Since the risk is
                                   minimal for the credit card company, the fees can be less. Whenever you decide to
                                   cancel the card, the deposit is returned.


                                   While credit card delinquency cannot be recovered from overnight, it is possible to
                                   suffer no lasting effects in the long-term. Once the delinquency has been rectified,
                                   the negative history can be diluted as much as possible.

                                   The key is to be patient and acquire a secured credit card. Using that new card wisely
                                   will allow you to be trusted by lenders again. Credit card delinquency is a challenge,
                                   but it is a challenge that can be dealt with successfully.




                                                                            3



Powered by TCPDF (www.tcpdf.org)
Curtis Rose is an experienced professional with extensive experience in all
aspects of personal finance. Curtis writes and publishes articles, courses,
guides and special reports on his personal finance blog. Sign up for his
monthly personal finance newsletter and receive tons of free information
that you can use to help you reach financial freedom.

               http://www.PersonalFinanceDashboard.com

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:4
posted:9/23/2012
language:
pages:4