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Debt pay off- where to start?


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A big factor in my low credit score is the fact that I currently have too much debt. Luckily I don't have any collections, judgments or anything too nasty (other than dreaded late payments this past fall) to worry about.

 

I am wanting to start paying down my debt but I want to do it in a way that will help my credit score improve. I have various credit cards as well as loans, some loans are through banks, some are through other lending institutions like Security Finance, Sun Loan, etc.

 

I've read that loans aren't revolving lines of credit like credit cards are, therefore credit cards that are maxed out are more detrimental to your score. Not sure if this is true, but I wanted to make sure my debt payoff efforts were going to work the best in my favor.

 

Do I pay off credit cards first or loans first?

 

For me, paying off my loans would help a great deal, as they have payments ranging from $75 a month to $193 (car payment) a month. My highest minimum credit card payment is $50.

 

I've also read that getting your credit cards down to 30% of their credit limit is also a key factor. I'm just not sure where to start. Thanks in advanced for any advice!

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First, realize that there are like 17 or so different FICO scoring models...and three different credit reporting agencies.  So, you have around 50 different scores.

 

The one we're allowed to see is the FICO Consumer Score...which is pretty close to the FICO Bank Card Score (the "sucker" score) which CCs use to predict who they will make money on.  That's where the 30% "utilization" comes in.  They want people who carry balances and pay them interest.  Unsecured loans also use this score, but their sweet spot is different.

 

You also have  Mortgage Scores, New Car Score, Insurance Scores, Employment Scores...etc...

 

So...read my signature...

 

As long as your car payment isn't with one of those buy here pay here places with an interest rate over 12%, just pay it on time.

 

As for the rest...start with the highest interest rate debt...put all your extra cash towards paying that off first.  When that's done, go to the next highest.

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