What Happens If I Can't Make Credit Card Payments?
What happens to you if you can't make your credit card payments depends on how you handle the situation. The worst thing you can do is to hope this problem goes away. Rather, you can minimize damages by taking the proper steps.
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Your Credit Score
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If you can't make your credit card payments, your credit score will go down, no matter what you do. Payment history is 35 percent of your FICO score. A low credit score affects your ability to get future credit or to get a low interest rate if you can get credit. Employers sometimes look at your credit score before hiring. As soon as you get back on your feet, however, you can start building up your credit score again.
Collection Agency
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After you are six months late in making a credit card payment, creditors charge off the account, meaning that the lender has given up on you and sends your account to a collection agency. If you ignore the collection agency, the debt collector could take you to court. If you have a cosigner on the account with you, your creditor will start to contact that person immediately.
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Judgment
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Once the debt collector wins a judgment against you, the typical course of action in most states is to garnish your wages for up to 25 percent of your after-tax income. In other states, known as creditor-friendly states, you can actually do jail time for failure to appear in court after receiving a summons. States that have jailed people for this, are Arkansas, Arizona, Washington, Illinois and Indiana, according to the StarTribune.com.
Expert Insight
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The Federal Trade Commission says that if you are having trouble making your credit card payments, you should contact your creditor immediately. Tell your creditor that you are having a difficult time making your credit card payment and ask if you can work out a modified payment plan. Another option is to work with a credit-counseling agency. You can find a reputable one through the National Foundation for Credit Counseling.
Warning
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Be leery of credit-repair companies. According to the Federal Trade Commission, some of these businesses charge consumers high fees and fail to follow through on helping you with your debt as they promise. Check out any type of credit-repair company with your state attorney general or with the Better Business Bureau before signing up with them.
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