My Debt

In Uncategorized on August 6, 2009 at 12:00 pm

Some of you may be wondering what exactly my debt consists of. Well if you want the WHOLE story, there is a lot more than what’s listed here because I have a car loan and a mortgage as well as my student loan and credit card debt. Yep, up to my eyeballs in debt. This is my life.

My first goal in becoming debt free is to get rid of my consumer debt. First of all, credit cards. I started out with 4. One is a line of credit, and three were issued by banks. One has since been paid off entirely – whee! – and the other three are in the snowball. The line of credit has a better interest rate so it is last on my list to get paid off, though the amount on it is really high.

I’ve been toying with the idea of lowering all credit card debts to 75% of my limits so that my credit score will go up. Since it will be taking my three years to pay it all off, I don’t want my score sitting low while I do this. All of the other stipulations for having a good score have been met. If you are curious as to what contributes to your score in Canada here are the points:

* Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.

I do this. Each payment is made when the bill arrives.

* Try to pay your bills in full by the due date. If you aren’t able to do this, pay at least the required minimum amount shown on your monthly credit card statement.

Always make just a little more than the minimum on all my debts, with the one being focused on getting the majority of my debt repayment amount.

* Try to pay your debts as quickly as possible.

Ha! Trying my best!

* Don’t go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.

I am not over any credit limit, but all are close to maxed. This is where I think I can improve by lowering the balance on all until they are all at 75%. This would change my debt repayment snowball, but I’m not sure how else to do that…?

* Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.

I haven’t had any inquiries in quite some time.

* Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You can build a credit history by using a credit card. See the next section to find out how.

Oh, I have a history all right!

What do you think?

  1. I wouldn’t worry about paying down the debt to 75%. I’ve been paying down my debt in hopes of my score going up but I’m finding that the credit card companies are reducing credit limits instead. The limit on my Discover card was originally $9,900 but was reduced to $8,000 once I paid it down to that amount. So now I’m maxed out even though I’ve been paying down the debt.

    • Are you in the U.S. or Canada? I think the way they look at it is different if you are in the U.S. They are lowering credit limits? Really??!?! I tend to lower mine anyways once I chop some debt off, but maybe I’ll leave them up there if they are just going to decrease it anyways.

  2. […] future financial plan. Not bad. But, since at this point in time my financial focus is on repaying my high interest credit card debt that keeps me up at night, I will revisit this topic again in a year’s […]

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