Delinquent means that some financial obligations under contract are violated or overdue. If a person or a company miss payments on any loan, and money have not been received by the due time, this individual or organization is delinquent. Permanent outstanding debts lead to default.
What does being Delinquent means
A financial situation in which a borrower past due in mortgage or credit card payments is negative, and an account of this client considered to be delinquent after 30 days of this delay. There are various consequences of being delinquent depending on different factors, such as creditor, type of credit product or cause of the delinquency.
If delinquencies are committed regularly, the debtor might be in the default situation, and this is the most severe result for permanently delinquent borrowers. If credit card payments are not made on time, the client must pay a late fee.
Regarding a mortgage, the lender can initiate a foreclosure procedure, if month payments are not received in a timely manner.
Regular delinquencies have a huge impact on credit rating of a debtor. Credit history, containing information about the customer's payments in different periods of the time, is a major factor in the credit score calculating of any borrower (it gives 35 percent of overall credit score). As a rule, the delinquency will stay on the credit report for about seven years.
Another use of Delinquent
A delinquent is defined as an individual, generally young, who behaves in a way that is illegal or not acceptable to most people. Also, the term delinquent is applicable to specialists working in the financial sector. If financial professionals deliberately mislead their clients or regularly present a dereliction of duty or neglect, such specialists are considered delinquent.
Difference between Delinquent and default
Both debt terms are concerned to different degrees of the same problem, which is inability to pay.
A delinquent status has a duration of 30 to 90 days, but the exact period is set individually by the creditor. For instance, on a student loan, a delinquent status goes into a default after 270 days of the delay. Being delinquent is a pre-default state, which leads to default in most of the cases.
A default is the next step. If mortgage payments are overdue by 90 days or more, most creditors accept it seriously delinquent and regard the risk of default as very high. This is usually followed by a process which is called foreclosure.
If there are serious problems with the timely loan payments, the creditor can go further by involving a third party—a collection agency. The creditor also has the right to start a judicial process against his borrower and, if the debt is secured, he can sell property of the borrower or his securities and paid off the debt.
Delinquent credit cards
When the client fail to make regular monthly payments, credit card delinquencies occur. If payments 30 days past due, the client is considered delinquent, although some creditors can wait for 45 or 60 days and only then report as being delinquent.
Being delinquent affects the credit score of any client. A few late payments probably will not be a big problem for a borrower, but multiple delinquencies will add up to a lower score. If the client have three to four missed payments in a row, he should think about the difficulties of obtaining credit in the future.
A loan works a little differently than other types of debt. When the client sign up for a loan, he agrees to repay the lender a specific amount of money at regular intervals until the debt is paid off. The lender determines the due date and, in some cases, may allow him to set this date based on your personal financial situation.
Most lenders also include a grace period, which may be a few days after the due date. If the client makes payment on or before this date, it may not be considered late, but he may still incur interest but not a late payment fee. If he fails to make the payment before, he is considered delinquent. His loan is in delinquent status even if he makes payment a day or two after the due date.
How to avoid being Delinquent
Delinquencies are reported to credit reporting agencies. But just because it appears on your history doesn't mean that it's impossible to remove it from your credit report.
Submit a report either online or in writing to the credit bureau disputing the delinquency. The client should also contact the lender to see what can be done, especially if he had a good reason for allowing the account to go into delinquency status. The client may have to offer to pay the account balance to have it deleted from your credit report.
Lenders often work with borrowers to help bring delinquent or defaulted accounts up to date, which means be able to bring the account up to date. The lender may not take any other action if the borrower can come up with a suitable arrangement. Keep in mind, though, that significant delinquencies and defaults will affect your credit score.
There are several ways to prevent delinquencies. Some options include automatic payments, which help individuals who have a difficult time keeping up with payment schedules. Signing up for e-billing help to receive email invoices instead of paper copies from lenders. The borrower can also ask the lender to move due dates closer to pay dates.