Credello: Americans Are Falling Way Behind on Their Bills
NEW YORK, June 22, 2023 (Newswire.com) - Credello: Americans are struggling to keep up with their car, credit card and mortgage payments these days, according to a report from the Federal Reserve Bank of New York. The report revealed that the share of debt balances that became at least 90 days delinquent in the first quarter of 2023 was 1.08%, up from 0.71% year-over-year.
What counts as a delinquent payment?
So, you're late paying a couple of bills. Will that automatically translate into delinquency on your credit report? A delinquent payment refers to a payment that is overdue or unpaid beyond the agreed-upon due date or grace period. When a borrower fails to make the required payment on time, it is considered a delinquency. This can apply to various types of financial obligations, such as loans, credit card bills, mortgages, utility bills, or any other contractual payment.
Lenders and creditors usually have procedures in place to address delinquent payments. These may involve sending reminders, assessing late fees, reporting delinquencies to credit bureaus, and, in more severe cases, initiating collection efforts or legal actions to recover the outstanding amount. Delinquent payments can negatively impact a person's credit history and credit score, making it more challenging to obtain credit in the future.
If you're falling behind on bill payments, here's what you need to know about the possible impact on your financial future.
Does delinquency show up on your credit report?
The good news is, missing payments does not automatically result in the immediate reporting of delinquency on your credit report. The process of reporting delinquency to credit bureaus typically involves a series of steps and timeframes. Here's a general outline of how it works:
- Missed Payment: When you miss a payment, it does not immediately show up as a delinquency on your credit report. Initially, the creditor or lender may send reminders or notifications to inform you about the missed payment and request payment.
- Grace Period: Many lenders and creditors provide a grace period after the due date during which you can make the payment without incurring any penalties or reporting. The length of the grace period varies depending on the creditor and the terms of your agreement.
- Delinquency Threshold: If you fail to make the payment within the grace period, the creditor may consider the payment delinquent. However, they may not report it to the credit bureaus immediately. Typically, a certain number of missed payments are required before they report the delinquency.
- Reporting to Credit Bureaus: Once the delinquency threshold is reached, the creditor may report the delinquent payment to one or more credit bureaus. This reporting can negatively affect your credit score and credit history.
- Impact on Credit Report: Once reported, the delinquent payment will generally appear on your credit report as a negative item. The specific information provided may include the date of the delinquency, the amount owed, the number of missed payments, and the current status of the account.
It's important to note that different creditors may have varying reporting practices, and the exact timeline can differ. Additionally, some creditors may offer options to make partial payments or negotiate alternative arrangements to avoid delinquency reporting.
The impact of foreclosure on your credit report
Now, things can get more serious if you're unable to keep up with mortgage payments. Foreclosure is a legal process where a lender takes possession of property from a borrower who has failed to make mortgage payments. It occurs when the borrower defaults on the loan, and the lender initiates proceedings to recover the debt by selling the property. Foreclosure can lead to the borrower losing their home, damaging their credit, and potentially facing eviction.
Does a foreclosure stay on your credit report? Yes, for a significant period of time. It is considered a severe negative item and can have a substantial impact on your credit history and credit score. In general, a foreclosure can remain on your credit report for up to seven years from the date it was first reported. During this time, it can make it more challenging to obtain new credit, secure favorable interest rates, or qualify for certain financial opportunities.
As time passes and you demonstrate responsible credit behavior, the impact of the foreclosure on your credit score may gradually diminish, but it will still be visible to potential lenders and creditors reviewing your credit history.
Credello is a financial tech company offering a personal finance tool that simplifies financial decisions through personalized, on-demand recommendations — so users can borrow, save, or invest with confidence. Credello believes that finding the right financial product should be as easy and interactive as online shopping, and we are on a mission to make that possible. For more information, please visit https://www.credello.com.