Credit card delinquency happens when you fall behind on making monthly payments on your cards. Technically, even being 30 days late on your bill is considered delinquent, but the information is reported to credit reporting agencies, usually when you have failed to make payments for two months.

If your account is delinquent, the event can have a negative impact on your credit score and can make it challenging for you to borrow in the future. However, there are several ways of dealing with delinquency and fixing your credit score, as discussed below in this article.

What Is Credit Card Delinquency?

If you use a credit card, you must pay off at least a portion of the credit card balance at the end of each month to keep your account in good standing. When you fail to make the monthly minimum payment, your account becomes delinquent.

Most credit card issuers only report a delinquent account to the credit bureaus when the account is 30 days late. This means that you still have a chance to make a payment before that happens to minimize the impact on your credit score if this is the first time you’re delinquent. If your account is still delinquent after 60 days, your credit score can be affected, and the credit card company may raise your interest rate. After 90 days, the lender may close your account and send it to collections. The lender can report it to the credit bureaus as a charge-off, which can further damage your credit score.

Causes and Rates in 2023

The 30-day credit card delinquency rate for the first quarter of 2023 rose to 2.43% from 2.25% in the previous quarter. This marks the sixth consecutive quarter of increases. However, delinquent rates are still close to historic lows. Delinquency rates have never dropped below 2% since 1991, until they started dropping in 2020. In comparison, delinquencies peaked at close to 7% in 2009, during the Great Recession.

Americans carried a balance on 56% of credit card accounts in the second quarter of 2022. Higher interest rates continue to push these balances up, making it even more difficult for cardholders to pay off their household debt. Americans are increasingly relying on their credit cards to maintain their consumption levels and keep their budget afloat, even as inflation declines and the outlook for the U.S. economy improves. This situation may worsen as student loan payments resume in October 2023. The recent rate hikes and increasingly expensive real estate compounds the issue.  

Is Your Credit Card Score Impacted?

If you have a lot of credit card debt and are finding it challenging to keep up with payments, it’s important to note that becoming delinquent will have a negative impact on your credit score. If you have missed one or two payments, the lender will report your account as delinquent. Initially, this impact may not be as severe.

Once you have missed three payments, your credit score may fall by 180 points or more. Once you have missed four payments, your lender will likely turn over your account to collections and mark it as charged off, further damaging your credit score.  

The Effects of Delinquency

Other than the damage to your credit score, when you are delinquent on your credit card accounts, the lender can revoke your charging privileges temporarily or permanently and close your account. Additionally, once you’ve missed a few payments and your account is in collections, you may start receiving collection calls. The collection agency may also decide to pursue legal action against you, which can result in wage garnishment and other consequences.

5 Tips To Avoid Credit Card Delinquency

The best way to avoid credit card delinquency is by using debt responsibly and effective money management. Here are a few tips you can try:

  1. Make a budget to ensure you have enough money coming in each month to cover all your expenses and bills. Account for all your fixed as well as discretionary expenses. Set aside enough money each month to pay more than the minimum on your cards.
  2. Set up autopay so you don’t miss payments. If you have multiple bills and are finding it difficult to remember due dates, autopay can be helpful.
  3. If you feel like it’s challenging to keep up with bills, stop using your credit cards immediately. You don’t want to rack up more debt than you already have.
  4. Reach out to your credit card issuer and discuss your situation if you’re getting behind on monthly payments. They may be able to work with you to negotiate your credit card debt.
  5. If you have multiple credit cards, consider taking out a debt consolidation loan so you’ll have one easy payment each month, ideally at a lower interest rate.

Credit Counseling and Debt Management Programs

Get in touch with a nonprofit credit counseling agency or a personal finance professional to see how you can get your debt back in control and manage your finances better. Credit counseling will provide you with financial education and resources to help you create a budget and a plan to pay off your debts.

Your counselor can also enroll you in a debt management program. Your counselor can negotiate with your lenders to waive fees and penalties or lower your interest rate. You’ll have a fixed monthly payment, which will then be distributed to your lenders.  

How To Protect Yourself from Debt Collectors

If you’re delinquent on credit cards, it’s likely that you’ll receive debt collector calls. They may get in touch with you to try and recover the debt you owe. While collection calls can be stressful, as a borrower, you have rights that you should be aware of.

The Fair Debt Collection Practices Act (FDCPA) regulates collection activities and protects you from unfair collection practices. If a debt collector is threatening you, using obscene language or other unlawful collection tactics, you can file a complaint against them with the Federal Trade Commission (FTC).

How To Handle Credit Card Delinquency

If you are already delinquent on your credit cards, here are a few tips on how to handle it effectively:

  • Start making payments on your credit card immediately. The sooner you start paying, the sooner you’ll be able to get back on track. Minimize all other expenses and prioritize credit card payments, especially if you’re over 30 days delinquent.
  • Get in touch with your credit card company. Check to see if they have a program to help consumers facing financial hardship. You may be able to temporarily get access to a forbearance plan or get a reduced monthly payment.  
  • If your account is in collections, try to negotiate a payment plan with the debt collection agency. You may even be able to negotiate a settlement with them.
  • Make sure you don’t use one credit card to pay off another delinquent credit card. This is not a permanent situation, and you’ll still have debt to pay off.

How To Fix Your Credit After Delinquency

Once you have a delinquency on your credit report, there’s not much you can do to remove that derogatory mark. However, there are several simple actions you can start taking to raise your credit scores:

  • Start paying all your bills on time each month. This is one of the best things you can do to start rebuilding your credit.
  • Lower your credit utilization. Pay down your debts and credit cards to improve your credit scores.
  • Do not close your old credit cards. The age of your accounts for 15% of your credit score, so closing your oldest accounts may lower your credit score further. Instead, keep them open, but plan not to use them so you don’t accumulate any more debt.  

Options for Dealing with Delinquent Credit Cards

When you’re in a tough spot financially, it’s easy to rack up credit card debt. Fortunately, there are several options available to you to deal with delinquent credit cards before they spiral out of control.

Debt Consolidation

Debt consolidation refers to replacing your high-interest credit cards with a debt consolidation loan at a lower interest rate or with a 0% balance transfer credit card. If you have a delinquent credit card, your credit score may be lower, and it may be difficult to qualify for a lower interest rate. But it’s still worth checking with multiple lenders to see if you can get a personal loan at a rate that is even a little lower than the interest rate you’re paying on your credit cards.  

Debt Settlement

If you’ve already missed payments for a few months and your credit score is damaged, debt settlement may be a good option to consider. You can hire a debt settlement company to negotiate with your lenders to settle your debt for less than you owe. In many cases, you may be able to save as much as 50% before fees. If your lender accepts the offer, you can pay a lump sum amount to close your account.

Bankruptcy

If none of the options listed above work for you, or you have overwhelming debt, bankruptcy can be a last resort option. For individuals, Chapter 7 and Chapter 13 are the two main types of bankruptcy options to consider. 

In Chapter 7 bankruptcy, the court will liquidate your non-exempt assets and pay off your lenders. Any remaining debts are wiped off through a bankruptcy discharge. In Chapter 13 bankruptcy, you’ll have to make a monthly payment as a part of a 3 to 5-year repayment plan. At the end of the repayment plan, you’ll receive a bankruptcy discharge, and the remaining debts are eliminated.  

The Bottom Line on Credit Card Delinquency

If you’ve failed to make a payment after 30 days and your credit card is in delinquency, it will take time and effort to recover from it. Your best bet is to address the issue as soon as possible so it doesn’t spiral out of control. 

Teresa Dodson, debt expert and founder of Greenbacks Consulting, offers the following advice:

“If you think you're going to be late making a payment, call the credit card company ASAP,” Dodson shares. “Once you've missed that payment, creditors report the delinquency, and the damage is done. Get in front of it!”

Recovering from credit card delinquency will take time and effort. Over time, the impact of delinquency on your credit score will diminish as you continue to use consumer credit responsibly and make timely payments. Tackle your debt at the earliest, ideally before your account becomes delinquent, through debt management programs, debt consolidation, and credit counseling. If you’re already delinquent, consider debt settlement or bankruptcy.