Consumer debt today is at an all-time high, and it continues to grow. Throughout the early years of this decade, there has been steadily increasing apprehension among economists about these higher debt levels. Analyses (and common sense) suggest that higher levels of consumer debt will eventually lead to higher delinquency and default rates. Let's look at some of the warning signs of financial trouble that creditors look for and what happens if you fall behind on a credit account.

Lenders and credit bureaus are watchful primarily for late payments or delinquencies as a sign of financial difficulties. Delinquencies are reports or notations that lenders make to credit bureaus when a borrower falls behind (by a certain length of time) on a scheduled credit payment. Delinquencies are measured in thirty-day increments. For example, if a credit card payment is due on March 15th and you haven't paid it within a few days past April 15th, there's a fair chance that the issuing company will report a thirty-day late notice to the credit bureaus. If you haven't made the payment by May 15th, the credit card company will almost certainly issue a sixty-day late notice to the bureaus. And if you haven't sent payment by June 15th, the company will report a ninety-day delinquency. Further seriously late payments are often lumped together in a '90-days-or-more' late category.

A lender might report a thirty-day late notice before you've even realized that you've fallen behind. For this reason, many credit card companies and consumer lenders tend to be somewhat forgiving about reporting an occasional thirty-day late payment. They'll generally assume that some simple mistake or oversight was the cause of the delay. However, if you're sixty days late on a payment or begin to make a habit of remitting thirty-day late payments, you'll almost certainly incur notices in your credit report – and they can stay there for up to seven years.

Collection activities and charge-offs are the second category of trouble signs that lenders look for on a credit report. These are actions that you should know about, because lenders will warn you in writing that they're about to take them. Going into collection is decidedly bad news – not only for you, but for your credit file as well. Once there, you can expect even more letters and creditor phone calls. And if collection is bad, a charge-off is just a little bit worse. It means that the lender has given up on collecting the debt and is writing off the amount from its active accounts. The lender retains the legal right to collect the debt but – at the present time – it's counting the debt as uncollectible.

Like delinquencies, collections and charge-offs can remain in your credit file for seven years – even if you pay off the amount that was owed. And although paying the amount won't remove the entry, it will change the account's status to "Paid" or "Satisfied", which is slightly better.

Another trouble sign that creditors watch for is a credit line that's used to its limit. Even if the account is being paid in a timely manner, it will still raise a red flag and suggest that you may have money problems.

Most lenders look for a pattern of behavior and payment rather than focusing on onetime or rare occurrences. Therefore, consistently paying all of your bills on time is a wise course of action to follow. It will improve any blemishes contained in your file and raise your credit score.

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