Which one pay first!!!!

[Anonymous]

Hi there:

I can say we survive the last year thanks to our credit cards but finally our situation is improving and now we are able pay way more than the minimum payments but sometimes feels like our effort is not paying off. Our credit cards APR go all the way to from 13% to 25%, I think we can not get a loan to consolidate the ones with really high interest or a balance transfer because our Fico Scores are around 625 due to our credit availability ratio not a single late payment in six years. 

Any advice in how to make our payments more effective?

Thanks in advance for your help 

BOT 

[creditwherecreditisdue]

Welcome to the forum, BOT. Post some details and we will try to assist you.

[Anonymous]

Thanks!!!!

Our credit card debt go all the way to 43K our minimum payments monthly get to $2200 additional to that we can pay $1000 to $1500 more each month.  

Should I just put that difference towards the ones with highest interest or pay first the ones with low interest and then transfer the balances of the high interest ones.

Thanks

BTO 

[creditwherecreditisdue]

If you have cards with small balances that can be paid off and removed from the process do that. That can help with the FICO models.

Generally you want to pay off the accounts with the highest APR's first. This will be the most economical way to proceed. Don't pay the lowest APR's first and then BT. That's going to end up costing you even more money. I doubt anyone is waiving any 0% APR - no fee BT offers your way these days! 

[marty56]

I would use the Debt Snowball approach which makes minimum payments on all but the card with the smallest balance and you back extra on that one until its PIF.  Then you pay the next smallest balance and so on.

This is the best way in terms of motivation and being FICO friendly.  It goes without saying you must stop using the cards.

[haulingthescoreup]

Extra income will work wonders too --it's a tough economy, but if one of you can pick up a weekend shift at Mickey D's, that money can go straight to the snowballing. And yummy free food, too! If you've gone through a rough year, you've probably already pruned your budget, but see if there's something else that can go. Can you live without cable for six months or a year? --and so forth.

The opposite version of snowballing (pay off the smallest balance, then next-smallest, etc.) is to pay the highest-interest card off first, then next-highest. This is more "correct" financially, but it can feel like it takes forever if that first card has a high balance.

What some people do is snowball the first three accounts and then go after the high-interest ones. That's good for morale, and it will save you some money once you can knock off the high-APR accounts.

And the deal with either approach is once you pay off an account, you add the amount you were paying on that one to the minimum you've been paying on the next one, so that it is reduced more quickly. On and on with the following accounts.

And as marty said, if you haven't already, get the cards out of your wallet and put them in the sock drawer.

Are there locally-based credit unions in your area? You might want to talk to them about a partial loan, especially for the highest-APR cards. I would first buy a new FICO EQ report from here (most CU's pull Equifax) and show it to the loan officer, asking for an educated opinion. They'll have to pull the real thing if you apply, but tell them it's a Beacon 5.0, just the slightly trimmed consumer version. They might be willing to give you a tentative thumbs up or down before the formal application.