Managing credit is very important in life. That’s why you’ll want to know what happens if you should default on your credit card payment.
Increased Interest Rates
One of the first things that is likely to happen if you have a default on your credit card payments is that your interest rate is likely to go up. That’s because you are seen as an increased risk when it comes to any possible further borrowing. That is why you should know how calculate credit card interest before this happens. As the experts at Lantern by SoFi point out, “Those with more credit problems will only be able to be approved for cards with higher rates.”
Once you’ve missed payments, the company may choose to send your debt to a collection agency. Collection agencies can contact you about the debt. They can also show up and ask you to repay the debt you owe in person as well as via mail and by contacting you on the phone. That can be embarrassing and frustrating.
Possible Legal Issues
If you have a large debt of any kind, the company may also choose to get a legal process in place to ask you to pay off your debt. Lawyers can contact you in much the same way as a collections agency. A County Court Judgement may be set in motion once the credit card company goes to court. As the amount you owe is not in dispute, it can be very hard to fight such issues and defend yourself in court. This can also affect your credit for as long as six years.
Your salary is another area that might be affected by a default on your credit card. If you are employed in any capacity, whether part-time or full-time, the credit card company can ask that your wages are garnished each paycheck. This is known as wage garnishment. It can mean they have access to your income each month, and you have no recourse to stop them. The credit card company has the right to receive part of your earnings directly. Your employer will be required by law to pay this debt for you before they pay you.
Credit Score Problems
Everyone has a credit score. Credit scores serve many purposes in your life. When you are defaulting on your credit card payments, this will have a hugely negative impact on your credit score both right now and for many years to come. It’s like to drop fifty to a hundred points or even more. That can lead to all sorts of problems. You might be denied a promotion at work. You also might find it a lot harder to buy a car and take out a mortgage if you want to buy a home.
A default on your credit card payment is a very serious matter. You should know about the likely consequences if this should happen.