Your card issuer will report the debt to credit bureaus, sue you for the balance, and eventually sell the account to a debt collector
If you never pay your credit card, the consequences unfold in stages over months and years. Your issuer starts by charging you late fees and raising your interest rate. After 30 days of non-payment, the account goes on your credit report as late. At 180 days (roughly six months) without payment, the issuer typically closes the account and sells the debt to a collection agency. That agency can then sue you in court, garnish your wages, or place a lien on your property — depending on your state's laws and whether they win a judgment.
The damage to your credit score is when ready and severe. A single late payment can drop your score by 100 points or more. The longer you don't pay, the worse it gets. A debt that goes to collections will stay on your credit report for seven years from the date you first missed a payment, making it harder to rent an apartment, get a car loan, or may have access to for new credit cards.
You are not powerless in this situation. You can negotiate a settlement with the issuer before they sell the debt, set up a payment plan, or work with a debt collector to resolve the account for less than you owe. The key is acting before the debt reaches court — once a judgment is entered against you, your options narrow significantly.
Key Takeaways
- Late fees and penalty interest rates kick in when ready, and your account goes to your credit report as late after 30 days of non-payment.
- After roughly six months without payment, your issuer closes the account and sells the debt to a collection agency that can sue you for the full balance.
- A judgment against you can result in wage garnishment or a lien on your property, depending on your state's laws.
- Contacting your issuer or the debt collector to negotiate a settlement or payment plan before a lawsuit is filed gives you the most leverage.
- The late payment and collection account will remain on your credit report for seven years, affecting your ability to borrow money during that time.
What happens in the first 30 to 90 days
Your issuer's first move is financial: they add a late fee (usually $25 to $40 for the first late payment, more for subsequent ones) and often increase your interest rate. Many cards have a penalty APR clause that kicks in after one late payment, sometimes raising your rate to 29% or higher. This means the balance grows faster even if you make no new charges.
After 30 days past due, the account appears on your credit report as "30 days late." This single notation can lower your credit score by 50 to 100 points, depending on your current score and credit history. At 60 days late, it shows as "60 days late" and the damage compounds. Your issuer may also start calling you — they are required by law to use reasonable collection practices, but they can call multiple times per week.
This is the window when you have the most negotiating power with your issuer. If you call and explain your situation, many issuers will work with you to set up a payment plan, temporarily lower your interest rate, or waive some fees. They would rather get paid than send your debt to collections.
The account closure and sale to collections (around 180 days)
If you have not paid anything for roughly six months (180 days), your issuer closes the account and writes off the debt as a loss on their books. They then sell the account to a debt collection agency for a fraction of what you owe — often 5 to 10 cents on the dollar. The collection agency now owns the debt and has the legal right to pursue you for the full amount you originally owed, plus any interest and fees they add.
When the debt sells to collections, your credit report is updated to show "Charged Off" or "Sent to Collections." This is worse than a late payment — it signals to future lenders that you did not pay money you borrowed. Your credit score typically drops another 50 to 100 points at this stage.
The collection agency will contact you by phone, mail, or email. They may offer to settle the debt for less than the full balance — sometimes 30 to 50 cents on the dollar — if you pay in a lump sum or agree to a payment plan. This is a real negotiation, not a final demand. If you have any ability to pay, this is the moment to explore a settlement, because the next step is a lawsuit.
Lawsuits and judgments
If you do not respond to the collection agency or reach a settlement, they can file a lawsuit against you in small claims court (for smaller balances) or civil court (for larger ones). You will receive a summons and complaint, usually delivered in person or by certified mail. This is a real legal document, not a threat — ignoring it is a serious mistake.
If you do not show up to court or respond to the lawsuit, the collection agency wins by default and receives a judgment against you. A judgment is a court order stating that you owe the debt. It is now a matter of public record and will appear on your credit report. More importantly, it gives the collection agency legal tools to collect the money.
With a judgment in hand, a collector can pursue wage garnishment — a court order that forces your employer to send a portion of your paycheck directly to the collector. The amount varies by state but is often 10 to 25% of your disposable income. They can also place a lien on your property, meaning if you sell your home or car, the proceeds go to pay the debt first. Some states allow bank account levies, where the collector freezes your account and takes the balance.
The specifics depend on your state. Some states are more protective of debtors — for example, Florida and Texas have strong homestead exemptions that prevent collectors from seizing your primary residence. Others allow broader collection tactics. Knowing your state's laws matters, and this is a point where talking to a lawyer becomes valuable.
The impact on your credit score and borrowing
A credit card you never pay damages your credit in multiple ways. The late payments, the charge-off, and the collection account all appear on your credit report simultaneously. Your credit score reflects all of this, and the combined effect is severe — scores often drop 150 to 200 points or more.
This affects every form of borrowing. Mortgage lenders will deny you outright if you have an unpaid collection account. Auto lenders may require a co-signer or charge you a much higher interest rate. Landlords often run credit checks and may refuse to rent to you. Some employers check credit reports for positions involving money or security clearance.
The good news is that the damage fades over time. After seven years from the date you first missed a payment, the account falls off your credit report entirely. Your score will begin to recover once it is gone. In the meantime, paying other bills on time and keeping credit card balances low on any remaining cards will gradually rebuild your score.
Your options before a lawsuit is filed
The period between when your account goes to collections and when a lawsuit is filed — usually a few months to a year — is your best window to resolve the debt on your terms. You have several paths forward.
Negotiate a settlement: Contact the collection agency and offer to pay a lump sum for less than the full balance. Many collectors will accept 30 to 50% of the debt if you can pay within 30 days. Get any settlement offer in writing before you pay, and make sure it states that the account will be marked as "settled" or "paid in full" on your credit report.
Set up a payment plan: If you cannot pay a lump sum, ask about a payment plan. Some collectors will accept monthly payments over 12 to 36 months. Again, get the terms in writing.
Request debt validation: Under the Fair Debt Collection Practices Act, you can send the collector a written request asking them to prove they own the debt and that the amount is correct. They have 30 days to respond. If they cannot validate the debt, they must stop collection efforts. This is not a way to erase the debt, but it can buy you time and sometimes reveals errors in their records.
Consult a lawyer: If the debt is large or you believe the collector is breaking the law (calling at illegal hours, threatening you, contacting your employer), a consumer law attorney can help. Many offer free consultations and work on contingency, meaning they take a percentage of any settlement or judgment in your favor.
What happens if you ignore a lawsuit
If you receive a summons and do nothing, the collector wins automatically. The court enters a default judgment against you, and the collector can when ready begin garnishing your wages or levying your bank account. You lose the chance to negotiate, to dispute the debt, or to argue that the collector made an error.
Even after a judgment is entered, you can sometimes reopen the case if you have a valid reason (you did not receive the summons, you have a defense, you have new evidence). This requires filing a motion with the court, and it is harder to win than if you had shown up the first time. A lawyer can help, but it costs money and time.
The lesson is straightforward: if you are sued, respond. Even if you cannot pay the full debt, showing up in court and explaining your situation is far better than ignoring the summons.
Frequently Asked Questions
Can a debt collector sue me if I am on a payment plan?
No, not if you are making payments as agreed. A payment plan is a contract, and as long as you stick to it, the collector cannot pursue legal action. Make sure the plan is in writing and that you keep records of every payment. If you miss a payment on the plan, the collector can resume collection efforts and may file a lawsuit.
Will I have to pay the debt forever if I never pay it?
No. The debt falls off your credit report after seven years from the date of first non-payment. However, the collector can still sue you after seven years in many states — the statute of limitations for debt collection varies by state and by type of debt, ranging from three to ten years. Once the statute of limitations expires, the collector cannot sue, but they can still contact you to collect.
What is the difference between a charge-off and a collection account?
A charge-off is when your original issuer writes off the debt as uncollectible and closes your account. A collection account is when that debt is sold to or assigned to a third-party collector. Both appear on your credit report and both damage your score, but a collection account often means the debt is actively being pursued.
Can I settle a credit card debt for less than I owe?
Yes, especially once the debt is with a collection agency. Collectors often accept 30 to 50% of the balance in a lump sum because they bought the debt for much less. Your original issuer is less likely to settle before selling the debt, but it is worth asking. Any settlement should be in writing and should specify how the account will be reported to credit bureaus.
Does paying off an old collection account improve my credit score?
Paying it off stops further collection efforts and prevents wage garnishment, which is important. However, paying an old collection account does not remove it from your credit report — it will still show as "paid collection" rather than "unpaid collection," which is slightly better but not a major score boost. The account still counts against you until seven years have passed since the original missed payment.