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Does Making Partial Payments Help?

Credit Score, Paying Off Debt, Personal Finance
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Does Making Partial Payments Help?

If you can’t pay a bill, it might seem better to send in what you can than to send nothing at all.

That’s probably a waste of money. Your creditor may cash the check, but that doesn’t mean you’re not considered late.

“Don’t assume that any payment you make will buy you more time or prevent damage to your credit scores,” NerdWallet columnist Liz Weston says. “You need to talk to the creditor. See if you can work out a payment arrangement that will keep you from being reported as late to the credit bureaus and having the account turned over to collections.”

If you are considering making a partial payment:

  • Contact the creditor beforehand. Ask it to accept a partial payment without late fees, to let you skip a payment, or to change the due date. Ask if the payment you’re considering will be reported as late. Find out if the creditor offers hardship programs.
  • Make arrangements to pay the shortfall. If you don’t catch up, it’s very likely that you’ll be reported late every month that the deficiency lingers.
  • Don’t delay the inevitable. If your hardship is not temporary, partial payments are not going to help. Explore debt relief options, Weston advises. “You don’t want to put this off and continue to throw good money after bad.”

Lastly, be strategic about your bills if you can’t pay them all in full. Necessities such as rent and food and perhaps transportation are higher priority than, say, student loans or credit cards or debt collectors. (See “How to Pay Bills When You Can’t Pay Your Bills.”)

Here’s a look at how much breathing room you have on different types of debt:

DebtReal trouble starts inPotential consequences
Mortgage90 to 120 daysForeclosure, loss of home
Auto loan1 day past due (though many lenders wait 60 days)Repossession, collection of unpaid debt
Federal student loans270 daysWage garnishment, tax refund seizure, partial seizure of Social Security benefits
Private student loans30 daysLawsuit, wage garnishment
Credit cards180 daysAccount charged off, sold to collections
Collections accountsDepends on amount, aggressiveness of collectorLawsuit, wage garnishment
Tax debt10 days after IRS sends first notice demanding paymentWage garnishment, property or bank account seizure
Child supportVaries by stateDriver's license suspension, tax refund seizure, passport revocation, wage or benefit garnishment, property liens, jail
Medical billsDepends on providerAccount turned over to collectors

Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.