How to Deal With Past-Due Accounts
Your credit card account is considered past due once you miss your credit card payment. The longer past due your account gets, the more your creditor or lender does to get you to catch up again.
When your account is only a little past due, collection efforts are mild. For example, you may get a friendly phone call or past due letter reminding you to make payment. As your account gets further behind, the letters and phone calls get more serious. The impact on your credit score also becomes more significant as your past-due time increases.
If you have an account that’s currently past due, there are a few options for dealing with it.
Pay the Entire Past-Due Balance
You can get your account back on track the fastest by making a lump-sum payment to cover the entire past-due balance. This is the easiest way to keep your account from being permanently charged off and sent to a collection agency. If you pay it off within 30 days of the initial due date, it may not even hurt your credit report. The further behind you are, though, the more your minimum payment will be because of the late fees and interest that have been added to your account.
Sometimes your past-due balance is too big to pay all at once. Talk to your creditor about spreading the past-due balance over two or three months. That way, you can catch up over time. Even if your creditor won't formally agree to a plan to get you caught up, you can still send in the extra payments. Send as much as you can until you're all caught up.
Beware that even though you're making catch-up payments, your account may not be considered "current" until you've fully paid the past-due balance. If you don't catch up before you become 180 days past due, your account will likely be charged off. At that point, your account will be closed and the entire balance will be due in full.
Negotiate a Pay for Delete
If you can afford to pay the past-due balance, it’s worth it to ask the creditor if they can re-age your account such that the delinquencies no longer appear. Creditors aren’t required to do this, but some will agree if this is the first time you’ve fallen behind on your payments. Send a letter to your creditor offering to pay the balance in full in exchange for them removing the delinquency from your credit history.
Consolidate the Account
Consolidating your account doesn’t pay it off, per se. Instead, you’ve shuffled the debt around so that it’s easier to pay. Consolidating the debt does bring your account current and help you avoid charge-off, but you now have a new debt to pay off.
You can consolidate using a balance transfer to move the balance to another credit card. Be aware that it can take a few weeks for a balance transfer to complete. Make the balance transfer request as soon as you decide this is the best way to handle your past-due account, so you can ensure the transfer is complete before your account is charged off.
Settle the Account
If you find it impossible to get back on track with your payments, you can try to work out a settlement plan with the creditor. By settling your account, the creditor agrees to accept a lower lump-sum payment (or series of payments) to satisfy the account.
When you present the settlement offer to the creditor, you need to have (or be able to borrow) enough money to settle the account. After you have fully settled your account, the “Settled” status will appear on your credit report.
File for Bankruptcy
If you’re struggling with several past-due accounts and your debts are overwhelming, you may have to file bankruptcy. It’s not the ideal option, but it may be the only thing that works for you. Before you decide to go through with a bankruptcy, talk to a court-approved credit counseling agency to find out if there are other ways you can get caught up.
Seek Consumer Credit Counseling
If you were caught up on your payments, but struggling to make the minimums every week, a debt management plan through a credit counseling agency might work for you. Unfortunately, some creditors will require you to bring your account current before they’ll agree to a lower interest rate and payment on a debt management plan. If you can’t afford to get caught up, then a credit counseling agency may not be able to help you save your account from charge-off.