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Mortgage Dictionary -> Delinquency

There are many things that can harm your credit score, and one of them is delinquency. But what exactly is delinquency? Why is it such a big deal? And how can you avoid it? These are all questions that those who are delinquent-or may become delinquent-have about delinquency, and if you're one of those people, or just someone who wants to know more about it, you'll learn here.

What is Delinquency?

Delinquency is probably a lot more common than you might think. In fact, 1 in 5 homeowners in the state of Louisiana is delinquent, and delinquency is only on the rise with all of the unemployment in the United States. So what is delinquency? It is being one or two months behind on loan payments. This can be on any type of loan (mortgages, credit cards, student loans etc.), which makes it easy for many people to go delinquent.

Why is it Such a Big Deal?

Delinquency is a big deal for the following two reasons:

1. It Can Lead to Foreclosure. Foreclosure is a very important problem, and causes many people to lose their homes. Once your home has been foreclosed upon, the chances are, you will not get to stay in the home. Becoming delinquent on a loan can cause foreclosure to occur, which is why it's such a good idea to avoid it altogether.

2. It Hurts Your Credit Score. Anytime you are late on a loan payment, or fail to pay the minimum, you will hurt your credit score. Being delinquent on your loans will hurt your credit score, which will, in turn, affect your ability to get future loans.

How Can I Avoid Delinquency?

There are two things you can do to avoid delinquency:

1. Make Your Payments On Time. It's such a simple thing, but so many people mail in their payments a day late. Even being a day late can cause delinquency, so always mail your payments in or make payments early.

2. If You Can't Make it On Time, Negotiate. Contrary to what you might think, many lenders want to work with their borrowers. If you cannot make your payment on time, you should call your lender and tell them why you can't, and they'll probably be willing to work with you. This can help you to avoid delinquency.