Credit (Definition) Check: What Does Delinquency Mean?

In a perfect world, you will pay your bills on time and not have to worry about payments being past due. However, there are instances when you might be considered delinquent, such as during times of financial hardship.  

What Does Delinquency Mean?
In general, delinquency means you are late on paying a bill or a loan. You can be considered delinquent if you miss a payment, such as on a student or car loan. Typically, consumers are classified as delinquent when they are 30 days or more past due for a payment. After a certain period of delinquency, the loan or other financial obligation may go into default.

What Happens If a Loan or Bill is Delinquent or Goes into Default?
Because you sign off on a loan, you are responsible for paying the full balance as well as any interest that may accrue. If you are not able to pay the balance and the loan or bill is delinquent or goes into default, this could result in severe consequences. When a student loan from the federal government is not paid on time, for instance, the government may collect a portion of your future paychecks as well as withhold any tax refunds you were slated to receive. In the event you were applying to a higher educational institution, you also may not be able to receive federal or state financial aid due to your delinquency status. If you owe money to a company, they could call on a collection agency to contact you if you stop making payments on time and require that you pay any existing collection fees. 

How Does Delinquency Affect My Credit?
A delinquency status will usually result in a lower credit score in addition to harming your ability to obtain future loans. When you are considered delinquent on an account, you're less likely to be approved for a credit card or other loans, such as for a house or a car. In addition to making it harder to be approved for credit or loans, the interest rates for your current loans or credit cards are likely to increase, as financial institutions see you as a greater risk. Other people who check your credit history, such as future apartment landlords or employers, can also see that you were delinquent on payments and choose to pass on your application.

How Can I Avoid Being Delinquent on Payments?
With the hard financial consequences of delinquency in mind, you'll want to make sure you pay all your bills and submit loan payments on time. Some companies offer automatic payments that will withdraw funds from your bank account directly to ensure the payments are on time. You should also regularly check your credit report by contacting one of the three main credit reporting bureaus to determine whether you are currently considered delinquent on bills or loans. In the event you find some errors on a credit report, such as delinquencies on balances that were paid in full, you should alert the bureaus to discrepancies in your credit report and then determine how to resolve them.