Partial Payments: How They Affect Your Credit
Partial payments will help lower your balance, but you can still face late fees, growing interest and damage to your credit score.
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Partial payment meaning
A partial payment is when you pay less than the full amount owed on a bill, loan or other financial obligation. For example, if your credit card bill is $350 and you only pay $175, that’s a partial payment.
If you can’t pay your credit card bill in full, it might seem better to send in a partial payment than to send nothing at all. But partial payments can have negative effects, such as late fees, interest and more.
A partial payment is not the same as a lender’s minimum payment. A minimum payment is the smallest amount your credit card issuer requires you to pay by the due date to keep your account in good standing. A partial payment is when you pay less than the minimum required amount.
Does a partial payment affect your credit score?
A partial payment can have a negative impact on your credit score. That’s because your creditor will mark the payment as missed or delinquent if you don’t at least make the minimum payment — and late payments can have a big impact on your credit.
Payment history is the biggest factor used to calculate your credit score. A late payment — made 30 days or more after the due date — stays on your credit reports for seven years after the account is first reported late.
Credit utilization, or how much of your available credit you're using, is also a key factor used to calculate credit scores. Partial payments can cause your debt to creep upward, and your credit utilization to creep upward, too. Paying bills in full keeps your credit utilization ratio lower — ideally you'd like it to be at 30% or less.
While the effect of the late payment wanes over time, the lingering mark can be an obstacle to getting financial products, such as credit cards or loans, as well as renting an apartment and getting approved for insurance.
What to do before making a partial payment
Make sure you have all the information you need before making a partial payment. Here's how to assess your situation:
Contact the creditor beforehand
Reach out to your lender and provide advanced notice that you won’t be able to make a full payment and why. You might ask the lender to accept a partial payment without late fees, to let you skip a payment, to lower your interest rate or to change the due date. You might also ask if the payment you’re considering will be reported as late.
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What to do if you're having trouble making your payments
Consider consolidating
Consolidating your credit card debt is one way to get payments under control and more organized. You also might be able to get a lower interest rate through debt consolidation, which is helpful if you have multiple debts with varying interest rates.
With a debt consolidation loan, you use the money to pay off your debts. You’re then left with the loan balance, which you pay back with fixed monthly installments for the loan’s term, usually two to seven years.
A balance transfer card is another option if you want to consolidate higher-interest debt. These cards are typically available to those with excellent credit, and opening one only makes sense if you’re going to save money. NerdWallet recommends cards that have low (or no) balance transfer fees, a long 0% promotional period and no annual fee.
Be strategic about bills
If you can’t pay in full, reevaluate your bills and consider prioritizing necessities or secured debts where you have collateral up for grabs. Necessities such as your rent or mortgage or car loan are higher priorities than student loans or credit cards — and your grace periods might be longer for the latter.
For credit card debt, real trouble starts 180 days after a missed payment. Your account could be charged off, sold to collections and end in a potential lawsuit.
See if you qualify for a hardship program
Some hardship programs for credit cards waive fees and interest rates for a specific time period if you have experienced unemployment, a health emergency or natural disaster or divorce.
Work with a nonprofit credit counseling agency
Certified counselors at nonprofit credit counseling agencies offer personalized budgeting help, debt management plans and counseling for bankruptcy, student loan and housing issues.
Are there upsides to partial payments?
Putting some money toward your debt is better than making no payment at all. Partial payments, while not ideal, do decrease the amount you owe and, in some cases, might help you pay less in interest and mitigate fees.
For example, paying your credit card balance in full every month is the best practice for staying out of debt and living within your means. But if you experience a hardship — such as unemployment or a medical emergency — paying only the minimum balance for a month or two might be the best option to protect your credit score and stay out of trouble with your lender.
When things get back to normal, you can resume full payments and work your way out of the debt you accrued during tough times.
To manage the uncertainty of life — and your personal finances — you have to be nimble. Even still, it’s important to remember that your goal should be to always pay your full credit card balance each month. Reevaluate your budget to best suit the season of life you’re in to avoid the pitfalls of partial payments.
