What to know about Defaulting on Your Credit Card Debt
For many people who are struggling with their credit card debts, defaulting on their debt is a huge fear. There are plenty of stories of people who were unable to pay their credit cards, and had their credit ratings ruined as a result. But, despite all of the stories and rumors that circulate about defaulting on your credit cards, few people know what will really happen if they have to resort to this step. That’s why we put together this list of things you need to know about credit card default.
- Default can be declared after missing a payment. While most credit card companies will charge you a late fee for a few months before declaring the account a loss, it is legal for them to declare an account in default as soon as 30 days have passed from a missed payment. IF you know you’re going to miss a payment, you need to make plans to do something about your debt as soon as possible so that you don’t have to deal with a collection agency.
- Default doesn’t mean you can stop paying. All a credit default really means is that your account will be charged off by the credit card company. That means they declare the money they loaned you as lost on their taxes. You still owe the money, however. In most cases, the credit card company will sell your debt to a collection agency. This is perfectly legal, and the collection agency is allowed to add extra fees to the debt.
- The money cannot be garnished from your paycheck. If you’re already in default, then you’ve probably been told all sorts of lies by collection companies. A collection agency is able to get a judgement against you in court, but they cannot garnish your paycheck. They are allowed to use a lot of other methods to collect the debt, however.
- Your credit score will suffer. Defaulting on a debt is one of the worst things you can do to your credit score. If you have good credit, expect your score to go down 100 points or more. The default will stay on your credit history for seven years, but after a year the effect it will have on your credit score will decrease.
<p data-sp-element=”content”>Instead of dealing with the hassle of default, try a debt consolidation loan. These loans will pay off all of your old debts and leave you with a single payment that you can afford.