Your account is considered past due once you miss your payment. The more past due your account becomes, 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 more delinquent, the letters and phone calls get more serious. The impact on your credit score is also more significant once your account is 90 days past due. 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 quickest by making a lump-sum payment to cover the entire past due balance. Unfortunately, the further behind you are, the more your minimum payment will be because of the late fees and interest that have been added to your account. Still, this is the easiest way to keep your account from being charged-off and sent to a collection agency.
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, even though you're making catch up payments, your account may not be considered "current" until you're all caught up. If you don't catch up before you become 180 days past due, your account may be charged-off.
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 show 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.
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. If you consolidate using a balance transfer, then you must know the terms of the balance transfer to eliminate an unexpected payment increase when an introductory rate expires.
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 to satisfy the account. When you present the settlement offer to the creditor, you need to have enough money on hand to settle the account or at least be able to borrow it. Note when you settle 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 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.