What’s the Difference Between Delinquency and Default?

Quick Answer

Your loan or credit account could become delinquent once you miss a payment, and it may go into default if you don’t bring it current again. The exact definition can vary depending on the circumstances, but neither is good for your credit.

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Delinquent and defaulted accounts are past-due accounts. Generally, an account becomes delinquent once you miss a payment, and if you miss several in a row, the account may go into default. However, the language and specifics can vary depending on the contract and type of loan.

Typically, delinquency means the account payment was not made on or before the payment due date. Default signifies the account terms were not met and the lender has determined the debt will not be paid; at that point the lender likely will send the debt to collection. Read on to learn more about delinquent and defaulted accounts and what they mean for your credit.

What Are Delinquent Accounts?

Delinquent accounts are past-due accounts. For example, if your credit card bill is due on the 15th of the month and you don't pay until the 25th, your account is considered delinquent in the interim. Although creditors won't report your delinquency to the credit bureaus immediately, they could charge you a late payment fee if you miss a payment by even a single day.

However, some creditors may give borrowers a grace period—which could be a few days or weeks—and you can avoid a late payment fee if you pay your bill in full before the grace period ends. If you're charged a late fee and then bring your account current, you could also call the creditor and ask if they can reverse the fee. This is usually only done as a one-time courtesy for borrowers who have a history of making all their payments on time.

What Are Defaulted Accounts?

Defaulted accounts are generally more severely past-due accounts, but the specific point that an account goes from being delinquent to in default isn't consistent among types of accounts or lenders.

With credit cards, for example, an account may be considered to be in default once it's one day past due. But a mortgage loan may be delinquent for 90 days before it's considered in default, and federal student loans aren't considered in default until they're 270 days past due.

How Do Delinquent and Defaulted Accounts Affect Your Credit?

Falling behind on your debt payments can hurt your credit scores, and even a single late payment could have a significant impact. However, creditors won't report a late payment to the credit bureaus until you're at least 30 days past due. While you might wind up paying a late fee, you may be able to bring your account current and avoid hurting your credit.

If you can't bring your account current in time, the negative impact can increase as you fall further behind on your bills. Delinquent and defaulted accounts can also hurt your credit scores for years, even if you pay off the balance.

How Long Do Late Payments Stay on Your Credit Report?

A late payment will stay on your credit report for up to seven years from when it first becomes delinquent, regardless of the current balance and whether the account is open or closed.

Additionally, if you've defaulted on an account, the creditor may close the account, charge off the debt and either send or sell the account to a collection agency. Both the charge-off and collection accounts may also appear on your credit report and hurt your credit scores.

Can You Remove These Accounts From Your Credit Report?

While you can dispute errors in your credit reports, you can't remove accounts that are accurately reported, even if they're closed or hurting your credit scores.

Credit accounts that show all payments were made on time can stay on your credit report for up to 10 years from the date they were closed. If the account was current at the time it was closed but shows late payments in the account's history, those late payments will be removed seven years from when they occurred.

If your account is past due when it's closed, the entire account and related collection accounts will be removed from your credit report within seven years of the first late payment that led to the default.

What to Do if You Have Delinquent or Defaulted Accounts

Falling further behind on your payments can lead to additional fees and interest that make it hard to bring your account current. The best approach is often to try to remedy the situation right away.

  • Try to bring your accounts current. If you missed a payment by accident, bring the account current and see if the creditor will refund any late payments.
  • Contact your lender. If you know you're going to miss an upcoming payment, contact your lender before the due date and let them know. They may have hardship options, such as a lower minimum payment or temporary deferment or forbearance, that can help keep your account from becoming delinquent.
  • Look into debt consolidation. Consolidating multiple debts into one loan can help lower your monthly payment and make it easier to manage payments.
  • Contact a credit counselor. A credit counselor may be able to review your finances to help you create a realistic budget. They may also be able to suggest other options, such as filing bankruptcy or using a counselor-run debt management plan to pay off unsecured debt.

If you're worried about the credit score implications of a late payment, focus on adding more positive information to your credit reports. In addition to bringing delinquent accounts current and making on-time payments, try to pay down credit card balances and continue to pay other bills on time.

Monitor Your Accounts

Monitoring your accounts for unexpected activity can help you catch an accidentally missed payment from going into default. You can check and monitor your credit report for free with Experian. You can also use your account to check and track your FICO® Score for free, which can be helpful if you want to know where you stand and how your actions are impacting your credit.

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