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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: Drazen Zigic/iStock/Getty Images Plus April 26, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Steve Bucci Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
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Before your account goes into default, it will become . This happens after missing a payment for 30 days. Default usually happens after six months in a row of not making at least the minimum payment due, which means your credit card is seriously delinquent. During that time you will be contacted by your creditor and they will want to know what you’re going to do about it. If they are not satisfied with your response (or the lack thereof), the account will be closed and after 180 days with no payment, reported as to the credit bureaus. How credit card default affects your score
Once your account is delinquent, your is going to be negatively impacted. When your account is charged off, the damage becomes more serious. are not immediately reported—for instance, if you miss your due date by a few days. It typically happens when you’re at least 30 days late. But once that happens, your score is in jeopardy of starting on a downward spiral. Every month of non-payment will result in another hit to your score, as the delinquency ages and balances owed increase due to interest and fees. And an actual default will likely result in the card’s line of credit being closed, which will cause your to soar to 100 percent on the account. It may be turned over to a , putting you in another category of bad for your score. (One notable exception to this rule is medical bills. They are not reported as past due until they’re six months old.) For those of you job hunting, the main worry is not your credit score, which employers generally are not interested in, but your . It is still common (it used to be virtually guaranteed) for employers to pull a credit report as part of the interviewing process. A string of delinquencies or defaults could make you less competitive. My advice is to make at least the minimum payments until your search is complete to keep your credit report looking as impressive as possible. What to do about credit card default
You have several options to . You can continue to pay it off, try to settle the debt for less than owed or . One might argue that a fourth option exists, which is to do nothing. But ignoring the problem will not make it go away. If you are able to evade your creditors until the for debt is reached, you then cannot be successfully sued in court for the debt. But remember, even in this unlikely scenario, you still owe the debt, so you have not in fact handled the debt. And we are talking about years here. Depending on , the statute of limitations could range from three to 20 years. That’s a long time to dodge a creditor. In the meantime, your credit score is likely just going to get worse and worse. Here are some options you can consider to help manage your debt. Pay in full
Paying your debt off in full is the best way to handle a default. While the creditor would love it if you could just write a check for the entire amount, you got here for a reason, and having the cash to pay it in one fell swoop may be impossible. So a payment plan may be the only option. Fortunately, many creditors are willing to work with customers to craft a short term plan with reduced payments or lower interest charges. You just . Contact your issuer
As with anything, prevention is better than a cure. If you find yourself in a position where you feel like you cannot make your payments, reach out to your credit card company immediately. Most creditors have systems in place to reduce your payments, at least for a short time, through a . These programs are not generally long-term, but may be enough to get you through to the other side. Debt settlement
You can also try to by paying less than you owe. But these negotiations are not without peril. Remember, if more than $600 in debt is forgiven, on the forgiven debt. As with any negotiation, be sure to get everything in writing and make sure the language clearly states that the debt will be considered paid in full. Otherwise, you may find that the creditor or collector has sold the remaining portion of the debt to another collector, which may then come after you for the balance. of debt settlement companies. While legitimate companies do exist, there are many far less reputable organizations that tend to be adversarial and have a terrible track record. There’s also nothing that a debt settlement company can do for you that you can’t do for yourself. Bankruptcy
may be in your future if you run out of other options. As part of your decision-making process, you can call a nonprofit credit counseling agency. You will be required to have as part of a bankruptcy filing anyway. But if you call the agency first, they may be able to help you cut through the emotion and fear of dealing with debt to determine your best course of action. Debt management plan
You may be able to combine features of all the above by using a offered by a non-profit credit counseling agency. If you qualify, they will get you preferred repayment terms, with concessions tailored to your budget for as long as five years. A debt management plan is similar to a Chapter 13 bankruptcy, but without the credit score damage. Contact the to get in touch with a member you can trust to help you find the best solution. The bottom line
Defaulting on your credit cards is never a good thing, but sometimes it cannot be helped. Knowing what the cost to your score will be before you take action will help you make the right decision for your situation. If you’re struggling to handle your credit card bills, communicating with your creditors early is your best hope of avoiding default. SHARE: Steve Bucci Highlights Investigative and political journalism Delivered on-the-ground news Newscast Production Experience Dignelly is an Associate Editor for CreditCards.com where she is dedicated to updating information for readers. She obtained her master’s degree in broadcast and digital journalism from Syracuse University in New York. During that period, she gained a variety of experience from her time interning with Tampa Bay’s NBC News affiliate station WFLA-TV News Channel 8 and their Spanish digital news outlet Tampa Hoy. Dignelly’s interest in finance has brought her here to join our news and advice team from Puerto Rico. She is committed to keeping you informed and updated with the latest financial news and information. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Related Articles