Partial Credit Payments – Here’s What You Need To Know

Partial Credit Payments – Here’s What You Need To Know

Isn’t it better to pay at least part of the monthly debt payment rather than not at all? By all means, creditors should encourage debtors to pay off anything they can! In actuality, paying creditors less than minimum may hurt your case.

Credit Card Usage Directly Impacts Credit Score

This is well known. However, it’s not the act of using credit cards that impacts score, but how people use the little, plastic card.

The resulting impact can be either good or bad, depending on how credit card is used i.e. if you’re paying your bills on time and keeping credit balance relatively lower than the limit assigned, the impact will be positive.

Yet, credit lenders are now able to glean off information about your credit score history by studying how credit card bills are paid.

Your Credit Card Issuer Is Reporting To Credit Bureaus

Credit bureaus are increasingly being informed (by your issuer) regarding your credit card bill payment, i.e. how much is paid every month. This means the data appears on your credit report, whether the full balance is paid, the minimum or something in between.

Yes, this data hasn’t yet been included in credit scoring models but credit lenders still consider the information when reviewing credit reports!

Making Partial Payments Means a Greater Credit Risk

It’s due to this reason that your credit report and history may face even greater risk if you suddenly go from a consistent ‘pay in full’ debtor to ‘making partial payments’. Worst of all, this will stay on your credit history.

Credit counsellors reiterate the importance of constant communication between yourself and the creditor. Debtors mistakenly assume that the payment they’re making is enough to prevent damage to credit scores or give them more time.

What most credit counselling services do advise is working out a payment agreement with the help of a third party bankruptcy trustee, which will be a beneficial agreement for all parties.

If you’re still considering making a partial payment, due to any reason:

2Get In Touch With Your Creditor before Making the Payment

There’s a good chance your creditor will charge a late fee on partial payments. Contact and inform the creditor about your intent of paying part of the monthly bill. If they do not accept, lay down other possible options such as giving you leave to skip a payment or changing the bill payment due date.

Also, find out if making a partial payment will be reported as late or not.

Inquire and Sign Up For Hardship Programs

Partial payments won’t help at all, in the long run. Therefore, if your hardships are temporary, it’s better to switch to making the full or minimum credit bill payment.

You can also sign up for hardship programs offered by your creditor, which will allow you to make partial payments without facing the repercussions.

Bankruptcy counsellors in Canada working behind the scenes at EmpireOne also advise debtors to be strategic when it comes to paying their bills. Recognise high priority bills (and expenditure) such as rent, food, transportation, etc. and pay them off first. Discover all your options today.



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