Financial Words of the Week: Delinquency and Derogatory

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Have you ever missed a credit card bill or a loan payment? You may know that missing a bill can hurt your credit, but do you know how much? What should you do about it?

What does a late payment mean for my credit?

Missing a loan or credit card payment is known as a delinquency. Delinquencies may  negatively affect your credit history and credit score. If you miss a payment, the best thing you can do is to make that payment as soon as possible. The longer you wait, the more interest will build up.

In terms of your credit score, you need to make the original payment before the next payment is due as well as that next payment. Generally, delinquencies are measured in months, rounding up to the nearest month. The day after the missed due date, an account could be counted as one month late, depending on the lender. One month and one day after the missed due date, that account may be considered two months late and is now a major derogatory.

What is a derogatory, and what makes it major or minor?

Any negative information on your credit history is a derogatory. When a lender reviews your credit, they look at what derogatories show up and how recent they are. Derogatories (or your lack of derogatory information) also make up an important chunk of your credit score. A debt two months late or more counts as a major derogatory. Major derogatories hurt your credit score more because of their serious nature. Other examples include bankruptcies, foreclosures and many debts that go to collections. If you have already missed one month, the best thing you can do is not let it become two.

UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.

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