If at any time of your loan or credit card payments, you have fallen behind or defaulted on your repayments, then your lender may ask to bring your account now. In other words, this implies you may have to pay a sum that is enough to clear any past due balance that has accumulated on your credit card or loan since you made your last payment towards it.
If you are falling behind on your credit card or loan payment or any other debt account, then lenders will consider you a high-risk category for approving potential loans or credit cards. So, always ensure that you have cleared all your past-due balances before getting any loan or credit card sanctioned.
What is meant by paying an account current?
When an account is current, that means there is not any payment due currently since you have cleared the payment. The only current due payment is the minimum payment for the current month with respect to the credit card or EMIs for the last unpaid month in respect of loans. Your loan lenders or credit card issuers prefer getting your account current, as otherwise, they risk losing money from delinquent accounts. Opting for paying your account current has various benefits for the borrower as well.
Key Benefits of Paying an Account Current
There are various benefits to paying an account current for the borrower as listed below.
Table Of Contents
Limit Calls from your Credit Card Issuer/Lender
If you have at any time not cleared all your pending dues on a credit card or loan EMIs and have not made any kind of arrangements for paying such dues, then you are sure to receive frequent reminder calls from your credit card issuer or lender asking you to make the payment immediately.
These frequent calls tend to be a nuisance. The caller is just doing his duty as part of the credit card or loan agreement to notify defaulters for payment. So, it is best to clear your account current and put an end to these nuisance calls.
Stops further Late Payments from getting reflected in your Credit Report
At any point in time, if your payment on loan or credit card is outstanding for more than 30 days past due, then your outstanding account status information is passed over to the credit bureaus by your lender. Such late payment gets reflected in your credit report which can adversely impact your credit score.
Paying your account current is beneficial to you as it leads to such outstanding not getting entered as late entries in your credit report. One should note that this payment of any outstanding does not stop any reporting of late payments which have already been reported to the credit bureau. Having a low credit score as part of your credit report can impair your chances of getting a future loan or credit card approved by the lender.
Stopping Charge-Off or Collection
Note that after the time period of six months of missed credit card payments, there is the added danger of your credit card account being written off. It could also be sent to a collection agency for necessitating further course of action.
Once your credit card account gets written off, it has a severe negative impact on your credit score. A written-off account will not be again opened or reopened in spite of you paying off the outstanding balance. So, it is always prudent to clear your past payment dues before the account is written off or goes to collection.
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- Enables restoring Purchase Privileges and Other Loans approved
If the outstanding on your account is past due, then credit card issuers could prevent you from going in for any new purchase through your card. Only after you have cleared all your past dues, then you can once again start using your credit card. In such a scenario, you not only do not get any additional purchase privilege but also negatively impact your credit score.
To check the status of all your credit accounts, you can use trusted sites like CreditMantri. CreditMantri helps you check your latest credit score for free and also gives you a detailed picture of all your credit accounts. You can use the free health assessment check available on the site and check the current status of your accounts. See which accounts are pending and bring them current to enjoy the various benefits listed above and avoid damaging your credit score and credit health.