By now, hopefully you've found some money. So, the next logical question is where do you put it? Where do you put it so that it will make the most difference in your credit score, naturally, but also in your life?
You've already been given a plan for paying back your credit cards
. Sometimes though, those cards should not be your top priority. Here's why: You have two types of debts. Secured debts
are those that have assets backing them up—they can be repossessed or taken back. They include your home and your cars. Unsecured debts
are those with no assets backing them up. If you don't make a payment on your credit card, the bank is not going to come and take back the blue jeans you bought at the mall. It might make your life miserable to have a collector call you at all hours, but the credit card company is not going to take away your place to sleep or your transportation to work.
- Your secured debts need to be at the top of your priority list.
- Debts for which your wages can be garnished. These include IRS, student loans and any child support payments. If you don't satisfy these, your paycheck is at risk.
- Any services you need to continue using. If you are not paying your doctor bills, that particular doctor is not going to be willing to see you again, right? That's a problem if you're relying on that doctor for care for a chronic condition.
- Unsecured debts, like credit cards. Once you've satisfied all of these urgent debts, you can begin to really focus on making headway with your credit cards. Use Step 3 to get them paid off as fast as possible.
- Family and friends. Hopefully your family and friends are the most understanding of your creditors. Confirm your commitment to repay the debts, but make them a lower priority and choose accounts that can improve your credit score first.