How Does Making Partial Payments Affect My Credit?
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Making a partial payment can drop your credit score if it’s recorded by the lender as a missed or late payment. When reported to the credit bureaus, this partial payment could stay on your credit report for up to 7 years.
If you can’t pay your bills in full, there are steps you can take to minimize the impact on your credit, including reaching out to your creditor before your payment is due, revisiting your budget and seeking credit counseling.
Knowing the grace periods for your various debts can be helpful when prioritizing which payments to make first.
The upside of partial payments is that they are still helping pay down your debt and can mitigate late fees and accruing interest.
If you can’t pay a bill, it might seem better to send in a partial payment than to send nothing at all. But partial payments to your debt can have negative effects, especially to your credit score. Here’s what you need to know if you’re struggling to make debt payments.
Does a partial payment affect your credit score?
Partial payments 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 stays on your credit report for seven years after the account is first reported late. While the affect of the late payment wanes over time, the lingering mark can be an obstacle to getting financial products, like credit cards or loans, as well as renting an apartment and getting approved for insurance.
» MORE: Get your free credit score with NerdWallet.
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.
What to do if you're having trouble making your payments
Consider consolidating
Consolidating your 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.
Here’s a look at how much breathing room you have for different types of debt:
Debt | Real trouble starts in ... | Potential consequences |
|---|---|---|
Mortgage | 90 to 120 days | Foreclosure, loss of home, credit score damage |
As soon as 1 day past due (though many lenders wait 60 days) | Repossession, collection of unpaid debt, credit score damage | |
270 days | Wage garnishment, tax refund seizure, credit score damage | |
Private student loans | Timeline varies by lender | Late fees, sold to collections, credit score damage, lawsuit |
180 days | Account charged off, sold to collections, potential lawsuit | |
Depends on debt amount, aggressiveness of collector | Lawsuit, wage garnishment | |
120 days | Assessed a penalty of 0.5% of unpaid bill for each outstanding month | |
Child support | Varies by state | Driver's license suspension, tax refund seizure, passport revocation, wage or benefit garnishment, property liens, jail |
Depends on provider, typically 1 year (if initial balance is $500 or more) | Account turned over to collectors, appears on credit reports |
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 or paying only the minimum, while not ideal, decreases the amount you owe and, in some cases, can help you pay less in interest and mitigate the impact of 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 — like 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 debt balances each month. Reevaluate your budget to best suit the season of life you’re in to avoid the pitfalls of partial payments.
