Blog   Tagged ‘delinquencies’

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.

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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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Paying off student loans doesn’t have to be a life sentence

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Picture yourself graduating from college. You may have landed a great job and moved into your own apartment. Or maybe you’re getting some work experience with an unpaid internship and you’ve moved back in with your parents for a few years. You may also have close to $30,000 in student loan debt that you feel like you’ll be paying off for the rest of your life.

You’re not alone. Before you go off to college, you might want to consider alternatives to student loans. Many people realize too late that they can’t afford the debt from their college expenses. Tuition, room and board, books and other costs over four or more years add up quickly. Not to mention if you choose to pursue an advanced degree.

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Student loan delinquencies in the U.S. are rising quickly. Student loan debt is also on the rise. The average student loan debt was $17,233 in 2005. In 2012, it had climbed to $27,253, an increase of more than 58 percent in just seven years.

Student Loan Delinquencies
Information from research done by FICO Labs

This debt increase combined with a slowly recovering economy has created an unstable situation; one that’s leading many to default on their student loan payments.

You might think defaulting on a loan isn’t a big deal. But, when you default on a loan, your credit rating drops and it’s more difficult to get approval for new credit. It’s a vicious cycle and it’s only getting worse. As more people default on their student loans, more of the population has lower credit scores, less access to credit and less opportunity to help grow the economy.

But this doesn’t mean you should skip college and go straight to working full-time. Student loans aren’t the only option to help pay for education. You do need to be prepared though. Don’t wait until you’re a senior in high school to start thinking about the following options:

  • Research scholarships and grants. As opposed to loans, students don’t have to pay back these types of financial aid.
  • Once you’re accepted to a school, research the least expensive options for non-tuition expenses (used books, on-campus housing, meal plans, etc.).
  • Get involved in the process so you can learn valuable financial lessons for the future. If you’re involved in the process from the start, you will have a better understanding of how to manage your money after college.


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Mr. Stone serves as vice president, financial center manager and is responsible for leading the execution of sales and client experience within the financial center. He joined UMB in 2005. Stone earned a Bachelor of Science in Management from Baker University in Baldwin, Kan.

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