I am surprisingly having to clean up my credit. I have some extra money – what should I pay off first?

Deal Score0

I found out these rules; can anyone verify these?

1) you need a balance of no more than 50% of your debt in unsecured loans. True? Does this include my mortgage payment? My unsecured loans are at lower interest rates than my secured loans.

2) One should maintain no more than a 50% overall balance on credit cards (versus total credit limit). True? If so, is that in aggregate or card by card? That is, if I have 7 credit cards and 1 with a balance over 50%, does that still hurt my FICO score?

Thanks for any help you can offer in advance.

4 Comments
  1. Reply
    McB
    April 30, 2011 at 1:36 am

    The best advice i can give you is to pick up a copy of “Financial Peace” by Dave Ramsey or listen to his radio show or check out his website.

  2. Reply
    Cheliebean
    April 30, 2011 at 2:16 am

    I’m not sure that those are set “rules” per say, but more like guidelines that lendors will look at when determining whether or not they will lend money to you. As for the 2nd one, I do know what one card with a balance over 50% does actually hurt your credit worse than a few cards with smaller balances, although it does not make a large difference in your credit score. That seems really dumb, b/c either way, it is the same amount of debt, but that is what I have read. Its worth it though, to have that much on one card, if it is a lower rate and you are trying to pay off debt. I.E., it doesn’t hurt your credit score so significantly that you should try to move balances around.

  3. Reply
    Jeanne R
    April 30, 2011 at 2:37 am

    My rule with credit cards is to pay off the balance every month. I don’t like owing money but sometimes we all find ourselves in that predicament. Yes, it does hurt your score when you get close to the credit limit on one or more cards. In order to improve your score you need to make all of your payments on time, every time. Better still, after you are paying on time, pay them off and get the debt off of your back. Here is the easiest way:

    Always pay off the highest interest rate card first, then the next highest and so on. Pay the minimum due on all of them and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on card #1 (the minimum payment and the extra payment) towards card #2. That will pay card #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly.

    To start :
    Card #1 (highest interest): minimum payment+ extra payment
    Card #2 (middle interest): minimum payment
    Card #3(lowest interest): minimum payment

    Card #1: paid off
    Card #2: minimum payment from Card #1+ Minimum payment from Card #2 +extra payment
    Card #3: minimum payment

    Card #1: paid off
    Card #2: paid off
    Card #3:Mimimum payment from card #1+ minimum payment from Card #2+ minimum payment from Card #3+ extra payment.

    That way, you will get them all paid off, on time, and pay the least interest.

  4. Reply
    Jennifer
    April 30, 2011 at 3:26 am

    Hi,
    I used “Credit Solution” to settle my debt and improve my credit score.They managed to reduce my debt up to 58% .It’s legitimate.I came across this company on NBC News Special Edition.Check it out here:
    http://click.linksynergy.decenturl.com/credit-solutions-credit-consolidatio-2

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