Delinquency on Credit Report: A Comprehensive Guide

Delinquency on Credit Report
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One of the most important factors that are considered by the bank before moving forward with a loan application is credit score and report. The amount of the loan, rate of interest, requirement of collateral etc are determined after checking the credit score and the repayment behaviour. Managing your credit report is very important for maintaining financial health. 

One of the key aspects that can negatively impact your credit score is delinquency. If you’ve come across the term while reviewing your credit report, it’s important to understand what it means, how it affects your financial standing, and what steps you can take to address it.

What is Delinquency on Credit Report?

In the context of credit, delinquency refers to a situation where a borrower has failed to make a payment on time. The bank or financial institutions report payments as delinquent when the borrower has delayed it up to 30 days or more i.e. the total days past due in CIBIL is 30 days or more. Delinquencies on credit reports can occur with various types of credit accounts like credit cards, mortgages, auto loans, education loans and personal loans.

Also Read: Check here all the major details on Derogatory marks on credit report

Types of Delinquency

Delinquency is usually categorised into 4 major categories: 30-Day, 60-Day, 90-Day and 120-Day delinquency. Here, 30-Day delinquency will have the least impact while 120-Day delinquency has the highest impact on your credit report and credit score. This is somehow similar to days past due where you can face a negative impact due to non-payment of a loan upto a certain number of days. Check the details in the table below:

Type of DelinquencyImpact on Credit Score
30-Day DelinquencyThe account is 30 days past due. This is often the first level of delinquency and may have a minor impact on your credit score if resolved quickly.
60-Day DelinquencyThe account is 60 days past due. This has a more significant impact and indicates a pattern of missed payments.
90-Day DelinquencyThe account is 90 days past due. At this stage, the delinquency is serious and can severely affect your credit score.
120-Day Delinquency and moreAccounts that are 120 days or more past due are typically considered very high risk. Creditors may charge off the account, sell the debt to a collection agency, or initiate legal action

How Delinquency Affects Your Credit Score

Delinquency significantly impacts your credit score by signalling to lenders that you are a higher credit risk. When a payment is 30 days or more past due, it is reported to credit bureaus, leading to an immediate drop in your score. Multiple or recent delinquencies can compound these effects, making it harder to secure loans or favourable interest rates in the future.

Credit scores are calculated based on several factors, with payment history being one of the most important factors. Delinquencies signal to lenders that you may be a higher risk, which can lower your credit score significantly. Check more details below:

  • Severity: The longer the payment is past due, the more it will affect your score.
  • Frequency: Multiple delinquent accounts or repeated delinquencies over time will have a compounded negative effect.
  • Recency: Recent delinquencies are more damaging than older ones.

Also Read: Check here all major information on Education Loan Default Legal Actions

Consequences of Delinquency on Credit Report

The consequences of delinquency on credit reports are far-reaching and can severely impact your financial health. A delinquent account can lead to a substantial drop in your credit score which will make it more challenging to obtain new credit or loans. You may face higher interest rates on any credit you do secure, increased scrutiny from potential landlords or employers, and the potential for your debt to be sent to collections, which can further damage your credit profile. Check the major consequences of delinquencies on credit reports below:

  • Lower Credit Score: As mentioned, delinquency can drastically lower your credit score which will make it harder to obtain new credit or loans.
  • Higher Interest Rates: With a lower credit score, banks and lenders may offer you credit but at much higher interest rates.
  • Difficulty in Securing Loans: Severe or repeated delinquencies can lead to loan applications being denied.
  • Collection Actions: If delinquency persists, the debt may be sent to collections, adding another negative mark to your credit report.
  • Legal Action: In extreme cases, creditors may sue for the unpaid debt, leading to further financial and legal consequences.

Steps to Address Delinquency

The best way to avoid delinquency is to avoid making late payments. Always try to make the repayments on or before the due date. Even if due to some reasons, the delinquency is reflected in your credit score then there are some ways to address the same. In order to address delinquency, start by reviewing your credit report to identify all delinquent accounts and verify their accuracy. Check the details below:

  • Download a copy of your credit report to verify the accuracy of the reported delinquencies. You are entitled to a free report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year through. You can also download it from apps like Paytm, PhonePe, MobiKwik etc.
  • Bring all accounts current as soon as you can. Contact your creditors to discuss payment plans or hardship programs that might be available.
  • If you find inaccuracies on your credit report, dispute them with the credit bureau. Provide documentation to support your claim.

Understanding and managing delinquency on credit reports is essential for maintaining a healthy credit profile. Check some of the common FAQs on Delinquency on Credit Report below.

FAQs

What is delinquency on a credit report?

Delinquency on a credit report refers to a situation where a borrower has failed to make a payment on time, with payments being reported as delinquent once they are 30 days or more past due.

How does delinquency affect my credit score?

Delinquency significantly impacts your credit score by signalling to lenders that you are a higher credit risk. A payment that is 30 days or more past due will lead to an immediate drop in your score. The longer the delinquency period (e.g., 60, 90, or 120 days), the more severe the impact.

What are the consequences of having delinquency on my credit report?

The consequences of delinquency on your credit report include a substantial drop in your credit score, making it difficult to obtain new credit or loans. In severe cases, prolonged delinquency can result in legal action from creditors.

What steps can I take to address delinquency on my credit report?

To address delinquency, start by reviewing your credit report to identify and verify all delinquent accounts. Contact your creditors to discuss payment plans or hardship programs to bring accounts current.

How can I prevent delinquency on my credit report?

The best way to prevent delinquency is to make all payments on or before their due dates. Setting up automatic payments, building an emergency fund to cover unexpected expenses, and regularly monitoring your credit report can help you stay on track.

To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.

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About Shekhar Suman

Shekhar is a versatile writer with a passion for sharing knowledge and creativity. With expertise in crafting informative blogs on study abroad and finance, Shekhar helps readers navigate the complexities of education and financial planning. Most of his writings blend the practicality of finance and the beauty of language, making a meaningful impact in both spheres. Beyond his professional pursuits, he finds solace in the writing Shayari.

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