Definition of Delinquency
Delinquency is a term used for a late or overdue payment on a loan or mortgage. Delinquencies affect your credit report and a person’s ability to apply for new loans or obtain credit. It is best to avoid missed and late payments in order to keep a good credit rating.
Why is this term important?
Depending on the type of delinquency, there are consequences in regards to the missed or late payment. For instance — if one is late in paying a minimum payment on their credit card, they may be dinged with a late fee on top of being charged interest. Delinquencies can stay on your credit report for six years, but could also appear for longer depending on the severity (such as bankruptcy).
If one is worried about a late or missed payment, it is always a good idea to contact the lender to explain the situation and see if you can work out a repayment plan together before the delinquency goes directly onto your credit report. If the lender is not contacted and multiple payments are late or missed, creditors will begin calling the borrower to discuss incurred charges on the account.
Examples of term
In the case of a delinquency made on a credit card, depending on your current credit score — you could drop anywhere from 50 to 100 points for each late payment. In the case of a delinquency made on a mortgage payment, you will be sent a warning from the lender. If two or more mortgage payments of late or missed, the borrower could be in jeopardy of a foreclosure.