022: Priorotize your “Bad” debts & watch your Credit Score

022: Priorotize your “Bad” debts & watch your Credit Score

We now have identified and made a list of what debts we have. Get your list out.

1. The next step is to figure out what will give you the biggest boost. From a financial perspective, it’s smart to pay off your highest-rate bad debt first. After all, putting $500 towards a $3,000 credit card bill with an 18% interest rate will save you far more than paying off a $500 bill at 6%.

2. And lastly consider how your debts affect your credit score.

If you have maxed out or close to maxing out your credit cards and you are thinking about buying a new car on credit, consider paying down those credit card balances to give you a better “Utilization ratio”, which means how much available credit you are using and will help you qualify for lower interest rates.

 
Anna Sergunina
anna@adviceonly.net

I passionately believe that in order to live a life of fulfillment and joy, we must genuinely serve each other in any way possible. I found my mission in life to serve others via financial planning. Anna regularly writes about personal finance. Her work appears on Business Insider, Nasdaq, Nerdwallet, among others. Anna is the creator of Money Flow system.

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