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Credit card delinquencies in the United States rose alarmingly in the second quarter of 2024 almost 9% of cardholders are behind on their payments. While there are likely countless reasons for this uptick, one factor at play is today’s record high credit card interest rateswhat average currently over 23%. Such high rates make it a challenge for cardholders to balance daily expenses with their mounting credit card bills, causing many vulnerable to missed payments and compound debt.
But arrears in credit card payments can sometimes occur serious consequences for your finances. Missed payments are typically reported to credit bureaus after 30 days, causing your credit score to drop. If the delinquency lasts longer than 90 days, the impact on your credit score becomes even greater as it indicates a more serious financial problem. Late fees also add up and interest continues to accrue, creating the debt more difficult to pay off with each passing month.
Like your credit card debt remains delinquent over an extended period of time, it can have long-lasting effects, damaging your credit for years to come. However, at some point, this type of debt will no longer impact your credit score. This raises an important question: how long can delinquent credit card debt be collected and when will it no longer impact your financial position?
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How long can delinquent credit card debts be collected?
The timeline for collecting credit card debt is more complex than many realize. The Fair Credit Reporting Act (FCRA) requires that most negative information, including delinquent credit card debt, remains on your credit report for seven years from the date of your first missed payment. However, this only limits how long it can appear on your report, not how long creditors can try to collect it.
Each state has its own statute of limitations for collecting debts and most states allow creditors to pursue this credit card debt for longer periods. This typically lasts three to 10 years, although some states allow collection for up to 15 years. After this period, a creditor can no longer do this take legal action to force payment, but they can still try to collect the debt voluntarily. Even after the statute of limitations has expired, some creditors may try to contact you or sell your debt to collection agencies.
In fact, delinquent debt can be sold and resold multiple times, which can result in: the collection process extends indefinitely – albeit without the legal power to enforce payment once the law has run its course. When the original creditors give up collecting, they often sell the debt to collection agencies for pennies on the dollar. These agencies can then sell the debt to other collection agencies. Any new owner may make new attempts to collect, although these must still operate within state-specific statutes of limitations.
Some of the key factors affecting collection timelines include:
- The state where you lived when you opened the account
- Whether the creditor has obtained a court ruling
- Any partial payments (which may cause the limitation period to restart)
- State-specific laws regarding debt collection practices
If a creditor obtains a court decision, the collection period is often significantly extended. Many states allow judgments to be extended repeatedly, potentially keeping the debt legally collectible for decades.
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What can you do now with your overdue credit card debt?
If you’re dealing with delinquent credit card debt, you can avoid long-term financial consequences by addressing it as early as possible. Fortunately there are various options for debt relief available to help you manage or reduce your debts:
- Debt consolidation: A debt consolidation program or loan can combine multiple high-interest debts into a single, manageable monthly payment, often at a lower interest rate than your credit cards.
- Credit advice: Credit counseling agencies provide guidance and creation a structured debt management plan to help you manage your payments and reduce interest costs. These programs often work with creditors to reduce interest rates and fees, making repayment more manageable over time.
- Debt forgiveness: If you are facing significant financial difficulties, cancellation of debts could be a viable option. In this case, you or a debt counselor negotiate with creditors to accept a lower amount of the total debt as payment in full.
- Bankruptcy: If you cannot manage your debts even with consolidation or settlement, bankruptcy can provide a legal avenue to eliminate or restructure your debts. Although it has serious consequences for your credit score, it can be a fresh start for people struggling with insurmountable debt.
The bottom line
If you’re behind on credit card payments, you may be tempted to wait out the collection process, but it’s important to take action quickly to avoid escalating efforts and further damage to your credit score. By exploring debt relief options that suit your situation, you may be able to reduce your financial burden and work toward a more stable future. Although delinquent debt will eventually no longer affect your credit at some point, taking control now can prevent additional stress, financial strain, and potential legal trouble down the road.
