What to do if you're struggling with bills and feeling behind financially

It’s no secret that American households are facing a perfect storm of economic challenges: Layoffs, tariffs, and inflation, just to name a few.

Now there’s new data showing just how serious the situation is: We’re falling behind on our bills.

Almost across the board, the new flow of borrowers into ‘serious delinquency’ (more than 90 days late) has been ticking up, according to the latest Household Debt and Credit Report from the New York Fed. Mortgages, rising to 1.38% in 2025’s fourth quarter, up from 1.09% the year before.

As of the end of February, home equity lines of credit were at 1.24%, up from .56%. Student loans were a whopping 16.19% (after previous forbearance from the Covid years). Meanwhile newly seriously delinquent auto loans stood at 2.95%, and credit cards at 7.13%.

For those struggling, keeping your head above water can feel like an impossible task. But it’s important to remember there are a few strategies you can take to stem the tide, minimize the damage, and get back on track.

“The most important thing is to do something,” says Bobbi Rebell Kaufman, a financial planner and author of books including “How To Be a Financial Grownup”. 

“Ignoring bills is not just about late fees and damage to your credit report. It is the start of a downward cycle that can have lasting psychological damage and even impact your relationships.”

The key mistake here isn’t necessarily missing a bill, which happens to most of us at one point or another, but in thinking you can’t do anything about it. Instead, you should analyze your options and be proactive.

A few action steps:

-Call your lenders. This is step one for borrowers in trouble, but something many people don’t even realize they can do. Perhaps because they don’t believe they can get better terms, or perhaps because they’re ashamed for not being able to pay their debts.

But lenders have no desire to see you drowning, because it means they won’t get their money. As a result, they’re probably more likely to assist than you might expect. That might mean temporary forbearance, or waived fees, or lowered interest rates or minimum payments.

“One of the first things you should do is to let your lender know,” says Matt Schulz, chief consumer finance analyst at LendingTree and author of the book “Ask Questions, Save Money, Make More”. “The sooner you do that, the more likely you are to get help, since most lenders have hardship programs that kick in.

“It can be hard to be vulnerable in that way, but it can be very helpful and it’s certainly better to do that preemptively, than after you’re already a couple of payments behind.”

-Rebuild credit. Long-term, maybe the most significant result of missed payments is potential damage to your credit score. Using data from FICO, for a consumer with a score of 607, missing just one initial payment could sink that number to a range of 570-590. Miss by 90 days and it keeps dropping, to 560-580. That drop will affect you negatively in myriad ways, like getting quoted much higher rates on a mortgage or car loan.

So after you stem the tide, you have some work to do in rebuilding. Using a secured charge card like Current’s Build Card can help you build your credit history, while minimizing your risks of debt, as you can only spend the amount of money available in your account. As you spend, your funds are held in reserve to pay your bill each month and these monthly payments are then reported to the three major credit bureaus (Equifax, Experian and TransUnion). Members have increased their credit scores by an average of 81 points six months after using the Build Card. 

-Access retirement money. This isn’t the ideal solution, since raiding your 401(k) or IRA will definitely impact your future. But for those in dire straits, it can certainly make sense to withdraw some of what you’ve already saved, in order to keep food on the table and a roof over your head.

One option is a 401(k) loan, which won’t result in early-withdrawal fees, and which can be paid back gradually over time. Another route to consider is a hardship withdrawal: In that case your financial challenges have to be documented, and the money you take out is treated as ordinary income (assuming you are under 59.5 years old). 

Typically you get knocked with a 10% penalty as well, except in certain circumstances (such as disability). Although occasionally, such as during the Covid pandemic, the federal government will scrap that extra 10% hit for early withdrawals.

-Consider credit counseling. There are specialty firms devoted to helping those who are slipping into financial trouble. They can negotiate with creditors, assist with budgeting, or facilitate debt consolidation loans, which could lead to reduced debt load at a lower rate than what you’re paying currently.

But be careful of who you’re dealing with, since the sharks tend to circle when people are slipping underwater, advises Schulz. A good place to start: The National Foundation for Credit Counseling and its roster of more than 1,500 certified counselors.

-Look into balance transfers. Average credit-card interest is around 20%, so if you’re falling behind on that debt, that’s the kind of sum that can spiral out of control very quickly. To avoid those punishing rates, you could arrange a balance transfer, where another card assumes the total and then typically offers a 0% introductory rate.

Of course, that sum you owe isn’t going to disappear, and you will need a decent credit score to even qualify. But a lengthy no-interest window could give you enough time to get back on your feet.

 “If you can get a balance transfer, it’s about the best weapon you have in the fight against credit card debt,” says Schulz. “Avoiding interest for a year or two is a big deal, and it’s very hard to beat that.”