Default
Default is a borrower's failure to meet the terms of a loan agreement, typically by missing payments. Most lenders treat an account as in default when payments are 90+ days past due, though the exact threshold varies. Default triggers consequences including credit reporting, late fees, debt collection, and possible legal action.
Default is the formal recognition that a borrower has stopped meeting their obligations. The exact timeline varies by loan type, but for personal installment loans, the typical sequence is:
- Day 1-15 past due: late, but not yet reported to bureaus
- Day 30: reported as 30-day delinquency, score drops 60-100 points
- Day 60: reported as 60-day delinquency, additional score drop
- Day 90: reported as 90-day delinquency, account considered “seriously delinquent”
- Day 120-180: charge-off (the lender writes off the debt as a loss for accounting purposes: but you still owe it)
- Post charge-off: debt typically sold to a collection agency
What default does to your credit
Default is one of the most damaging things that can happen to your credit profile. The 90-day delinquency mark and subsequent charge-off can drop your score 100-200+ points. Recovery typically takes 24-36 months of consistent on-time payments on remaining accounts.
Negative information from a default stays on your credit report for 7 years from the date of first delinquency, regardless of whether the debt is later paid off, settled, or sold.
What default doesn’t automatically trigger
A few things that often don’t happen automatically when you default:
- Wage garnishment: requires a lawsuit and judgment first; uncommon for debts under $5,000
- Bank account levy: also requires a court judgment
- Asset seizure: only for secured loans where collateral can be claimed
For unsecured personal loan defaults under $5,000, the most common outcomes are credit damage and collection calls. Lawsuits do happen but aren’t automatic. See our guide on what happens if you default for the realistic timeline.