The Truth of Credit

If you find yourself in way over your head in debt and want to start on the the path to recovery you need to prioritize. No two situations are ever the same so take this advice only as a guide and customize to your situation. There are different kinds of debt and you should prioritize in order of importance.  Let me define importance in terms of how it is used here. Importance will mean the most time sensitive debt and the debt most likely to effect your life dramatically.

Most Important:

1. House
2. Car

Rick’s Take- This should be pretty self-explanatory. These two items are by far the biggest value items that you probably own. Also, its safe to say without a car it would be tough to hold a job. Without, a home it’s even harder to keep a family together.

Important:

3. Credit Cards

Rick’s Take- Most people make the mistake of rankings these last put they are costing you a whole hell of a lot of money each month and are very quick to report delinquencies on your account.  Trust me, by paying these off you will be wealthier. 

Less Important (But, Important)

4. Medical Bills
5. Student Loans

Rick’s Take- Medicals bills are a need and are much more likely to put you on a payment plan. Also, historically these are a little slower in reporting delinquent accounts. However, they can drag down a credit score just as easy as the more important forms of debt. Student Loans can be deferred for a period of time and the amount of interest will not burn a whole in your pocket like a credit card would.

Honorable Mention: If you owe the IRS or have judgments against you those clearly need to go near the top of list.

The TRUTH is that any kind of debt can turn into a death-sentence if ignored. If you create a plan according to importance this will make it easier to not only save you money but also your sanity.

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