Of course, this is easier said than done. Some general rules include paying down those credit cards with the highest interest rates, first. Or, pay off a very small balance so you have a quick hit (doesn't that feel good!). If there are ancillary benefits, such as tax deductible home mortgage interest, then that's debt you may want to pay off last. Oh yes, don't forget the deductibility of some student loan interest.
In every case it makes sense to have a spending plan (we called this a budget in the good old days) so you don't go broke paying off credit cards.
Next year, Fair Isaac Corp., the company that created the FICO score, will be adjusting the way it computes its credit scores. One of the top changes will be a greater negative weight on credit utilization. Credit utilization measures how close you get to the borrowing limit of each of your accounts. The company says for optimal scoring, each account’s outstanding credit should be no more than 50 percent of the credit line and hopefully less.
As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.
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