What's the best way to get rid of this debt?

[Anonymous]

Hi,

I have all of my CC debt laid out below. I just started a part time job to (primarily) pay down my credit cards.  If there is something I can do other than the "pay the one with the highest interest first", or perhaps take another approach, I'd like to hear it.

Here is my situation:

            CREDIT LIMIT     INT%     50% OF CL     MY BALANCE     MIN MO PMNT     FINANCE CHG

VISA:             $5500             18.99         $2750            $3300                   $82.00                     $46.45

CAP ONE       3500             18.90           1750              2800                     84.00                       44.18

HSBC             2500             14.99           1250              1600                     36.00                       19.23

WAMU            3000             12.99           1500              2035                     40.00                       21.01

CAP ONE

BUSINESS     2000                 0              1000              2000                      60.00                         0

TOTALS:     $16,000         AV:16.46%   $8250          $11,758                   $302                      $130.87

If this was your situation, what would you do?  My credit score right now is 660 and I want to refinance my house this December from 7.5 to a lower rate.  I filed Chapter 7  three years ago and haven't missed a payment on anything since then.

I would really appreciate any help there is to offer.  I want to do something before I'm at the point of no return again.

THANKS!!

[Anonymous]

bump

[marty56]

Allowing for reporting times, that gives you about 4 months to pay down the balances since they are all around 50%.  IMHO not a lot of time unless you have a lot of money to through at the debt.  The answer depends on how much money you have to pay down the CCs.

Usually, people would pay minimum payments on all the cards except for the smaller balance.  They would ignore interest rates.  While this plan may cost you more money in the long run, poeple get motivation out of seeing the cards PIF one by one (I did through a DMP program).

In your case, since time is an issue (I will assume you have extra money), I would try to make extra payments on each card to get their utils to say 30% and idealy to 9%.

I would also look at the score simulator to get an upper bound on what your scores might be based on how much money you can use to pay the balances down.  This will give you a best case scenario which would give you an idea of what you could refi to.  This will show you if it is worth doing now vs waiting to pay off more debt.

[llecs]

I'd focus on a goal. If your total CC debt is $11,758 and you are at 71.3% utilization now (your total CL is off by $500 in your example), then as Marty mentioned, you'd want to get down to 9% by the refi date.

Shelve your cards until December.

You'd ideally should pay off your CCs down to 9% or $1,485. Therefore, you have $10,273 you need to payoff by then. Including December, there are 5 months between now and then. So, you need to pay at least $2055 per month between now and then.

IMO, pay the lowest balace CC first and pay the minimum on the others. This accomplishes 2 things. First, each CC has a minimum you have to pay and paying off a CC means you have that much more money you could use towards the next CC. Second, FICO likes to see half of your CCs at $0. Doing this will give you $0 balance CCs even if you don't hit your goal.