How to Pay a Past-Due Account

1. Assess the Situation

When you've missed just one or two bill payments, this can be an easy step. But if multiple outstanding debts are unpaid, take inventory of how much you owe. Gather all of your bills and look at the due dates listed on each statement. See which payments you've missed, which ones are due soon and which have plenty of time before they are due. From here, you can set goals for catching up on all of your payments.

Learn more: How Can I Find All My Debt?

2. Contact Your Creditors

Lenders and loan servicers may be willing to work with you to bring your past-due accounts current. If you call and explain your situation, your lender could offer an extension, forbearance, fee waivers or another way to repay your debt. You'll never know unless you contact your creditors directly.

Depending on the type of bill, you might also check out hardship programs, such as:

• Mortgage forbearance
• Rent relief
• Credit card forbearance

Be aware: Hardship programs won't eliminate your debt, but they may temporarily reduce your payment, eliminate late fees and other charges or offer options that can help you avoid missing a payment in the future. That can provide much-needed relief when you're in a tough financial spot.

Learn more: What to Do if You Miss a Payment

3. Pay the Full Balance

The best way to remain current on your bills is to pay the balances in full each month on or before the due date. If you slip behind, however, and you're financially able, try paying off the bill as soon as possible. You likely won't see a late payment notation in your credit report if you pay the bill within 30 days of the due date.

If you have multiple past-due accounts, you could choose to pay the full balance for the one that's the most overdue, has the highest interest rate or is the smallest in amount. The important thing to do is act: The longer you wait, accrued interest and other fees can add up and make paying off past-due accounts even more difficult.

Learn more: When Do Late Payments Get Reported?

4. Create a Payment Plan

Let's say you can't pay the full balances on all your past-due accounts. Instead, consider paying them down incrementally by following a payment plan. This will help you prioritize debt repayment and stay accountable until you reach debt freedom. Two methods for achieving this goal are:

• The debt avalanche method: Paying off debt with this method entails making minimum payments on all your debts, then using any money you have left over to pay down the account with the highest interest rate. Once that account is paid off, put the most money to the debt with the next-highest interest rate and so on until all your debts are paid off. This is best for those who want the option that will most limit interest charges.
• The debt snowball method: With this method, you make minimum payments on all your debts and use any extra cash to pay off the debt with the lowest balance before moving to the next-smallest debt. This is best for those who want to feel motivated by immediate wins on their debt repayment journey.

You can also use Experian's credit card payoff calculator to estimate how long it will take to get rid of credit card debt if you pay, say $100 per month instead of the minimum payment. The calculator will show your payoff date, total interest and principal paid and your payment schedule.

Credit card payoff calculator

5. Consolidate Your Debts

If your credit is good, you may qualify for a low-interest debt consolidation loan or balance transfer credit card, which you can use as part of your payment plan. By consolidating your debts into one payment, instead of many, you can use the money you save in interest to accelerate payoff of past-due accounts. It may also make it less complicated to manage your bills.

Debt Consolidation Loan

A debt consolidation loan combines multiple debts into one new loan, making it easier to budget and manage your monthly payments. If you have good credit, you may qualify for a lower interest rate than you currently have, which can save you money and help pay off past-due accounts faster. However, falling behind on your loan payments can mean being charged extra fees and penalties. Missed payments on the new loan can also put your credit score at risk.

Balance Transfer Credit Card

A balance transfer credit card lets you transfer existing credit card balances, and often other types of debt, to a new card with little or no interest for a limited time. Some balance transfer cards offer an introductory 0% APR promotional period, saving you a bundle in interest charges. If you fail to pay off the transferred balance in full within the introductory period, however, you'll be stuck paying a higher APR on your remaining debt.

6. Work With a Credit Counselor

Sometimes paying off past-due accounts requires calling in the experts. A credit counselor at a nonprofit credit counseling agency can review your finances and help you devise a plan to get out of debt.

Your first meeting with a credit counselor is typically free. But the credit counselor may then offer to put you on a debt management plan (DMP), which combines multiple credit card payments into one and allows the counselor to negotiate with your credit card issuers to lower interest rates or reduce fees. A DMP comes with an initial fee of about $50 and a monthly charge of $30 to $100.

Be aware: It's important to understand all the potential benefits and drawbacks of a DMP, such as the need to close your credit cards included in the plan, before moving forward.

Learn more: Does Credit Counseling Hurt Your Credit?

What Are the Consequences of Past-Due Accounts?

Left unaddressed, there are several consequences that may result from an account being past due. They include:

• Late fees: Typically, credit card late fees are around $32. Mortgage late fees vary from 3% to 6% of your monthly mortgage payment. Depending on the type of debt, you may have a grace period after your due date—typically 15 days for mortgages—before a late fee goes into effect.
• Penalty APR: A penalty APR can be triggered if you fail to make your monthly credit card payment on time. That means you may pay a higher interest rate on future purchases. If you can't bring a past-due account current within 60 days, the penalty APR may apply to the current balance, too.
• Loss of promotional APRs: If you're currently taking advantage of a credit card's promotional 0% or low APR and miss a payment by even one day, you may lose that temporary interest rate.
• Damaged credit: While consistently paying your bills on time can give your credit a lift, delinquent accounts can lower your credit score and make it more difficult to qualify for financing in the future. If you miss a bill payment, it can get reported to the credit bureaus once you are at least 30 days past due (federal student loans aren't reported late until they're 90 days past due). Late payments remain on your credit report for seven years from the date the account first became past due. If you can bring your account current before the 30-day mark, your credit won't take a hit.
• Charge-offs: If a creditor has tried and failed to receive a payment from you, the creditor may close your account and charge it off. When this happens, the charge-off will appear on your credit report. If the creditor sells the account to a collection agency, you'll start hearing from debt collectors seeking payment for the debt, and you'll get another negative mark on your credit report.

Learn more: What's the Difference Between a Late Payment and Missed Payment?

Frequently Asked Questions

The Bottom Line

Past-due accounts are far from lost causes. There are lots of ways to prevent one or even several missed credit payments from growing into a larger problem, for your credit and your cash flow.

If you're working to bring your past-due accounts current, consider signing up for free credit monitoring from Experian. You'll get real-time alerts to changes to your credit reports, including new notations of late payments, so you can act quickly.