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What does it mean to Default? What Effect Does it Have on Your Credit?

When our financial obligations become overwhelming, it's necessary to wish all the problems would just magically disappear. The problem is that burying your head under the sand won't help. When you emerge, the bills will be right there waiting for you; ignoring them won't make them go away. Although most people know the reality of this, many of us still find ourselves in situations where we have continued to ignore pending bills.

The most important thing to remember is that ignoring a credit card does not make it go away. If you continue to ignore your credit card bill, the bill will multiply in size as finance charges and interest rates pile up. Once your bill has been neglected for 270 days, it goes into “default”.

Loans that go into default can have detrimental consequences. Not only has your bill grown substantially in size. It is often turned over to a collection agency. When this happens, it's only a matter of time before it is reported to the credit bureaus.

Your bill then becomes a problem that can haunt you for years to come. Your credit report will be tainted, showing evidence to all potential lenders that you failed to fulfill your financial obligation and pay your bill. You can even have your wages garnished, lose your tax refunds, or actually find yourself faced with the expense and stress of a lawsuit.

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