Written by Barry Choi
Saturday, October 27th, 2018
It's a terrible feeling when your credit card bill arrives and you know you don't have enough money to make even the minimum payment. It's not that you don't want to pay your bills, but financial hardship can happen to even the best of us.
Not paying your credit card bills can affect your credit score, but depending on your situation, you might be able to take care of things before it gets out of hand.
Keep in mind, different banks will follow very different processes when a payment is past due on an account.
What can happen if you miss one credit card payment?
It's unlikely that one missed payment will affect your credit score, but it's really up to your credit card provider to decide what happens next.
Interest charges will immediately apply to all your purchases, and it's also possible the interest rate on your credit card will go up. Keep in mind that a missed payment is considered anything less than the minimum payment, so if you can at least pay that amount, you're actually not in bad shape.
If the missed payment was an honest mistake, contact your bank and explain the situation.
If you have a history of missing payments, they may report you to the credit bureaus.
What can happen if you miss two credit card payments?
An immediate credit score drop of 60 - 100 points is possible since credit card providers consider two consecutive missed payments a red flag. Your interest rate will probably go up (depending on your provider), but it's that instant hit to your credit score that should concern you.
Creditors look at your credit score to determine what level of risk is associated with lending you money. The lower your score, the less likely it is that you'll be approved for a loan at a low-interest rate in the future. If you ever plan on getting a mortgage or applying for a car loan, you'll want to make sure your credit score is in good standing.
Since your account gets flagged with two missed payments, your credit card provider's internal collection team (or an outsourced one) will contact you to remind you that if a payment is not made, your account will be turned over to a collection agency.
If you're still facing financial strain, it's worth asking if there are any other solutions to settle your debt (e.g. a negotiated lower payment). What happens next is entirely up to your creditors, which is why it's important to always keep the lines of communication open with them.
What can happen when your account goes to collections?
Often credit card companies outsource certain collection activities while the account is still on the credit card provider's books. Only after they fail to collect do they officially sell the debt to a collection company.
These agencies typically aren't as polite and will make every attempt to collect what you owe. They're known to constantly call people at home and work, which can affect your personal life.
It's never a good idea to ignore your credit card bills. By being proactive and addressing your debt, you might be able to avoid any long-term consequences.