We mentioned this trick in the previous post about getting out of debt on your credit card to repair your credit. credit card debts can be difficult to pay off, specially if they mount up on multiple credit cards.
The first thing that you will have to do is come up with enough money to meet your minimum payments on all your debts. As mentioned before, this requires budgeting. If you cannot do this, take the service a voluntary or state run credit counseling service. It is important to meet the minimum payments on ALL your credit accounts as not doing that will result in the account defaulting. Once that happens, the account is shown in the credit report as being late by more than 30 days and this record can stay on your credit report for a period of 7 years. Since the idea here is to repair your credit score, you do not want any negative entries impacting your scores. Since you are in debt, it is obvious that you do not have the money to make the payments in full. All credit cards have a monthly minimum that is a percentage of the original amount that you owe them. Make sure that you have enough to meet these while still being able to meet your monthly expenditures.
Now that you are able to do this, make the minimum payments on all accounts except one. on the smallest debt, make the full payment every month till the time that the debt is completely paid off. Then work you way up to the next highest amount and start making the full payment on that account. It is common advice and instinct to want to get out of the biggest debt first as that seems to be more pressing and you are paying more money as interest.
But the idea here is to get you to meet all your payments without breaking your back. If you try and meet the largest debt first, you may have to overstretch your finances, live under stress, cut down on essential needs and even default on the lesser accounts. When trying to repair credit, no account or debt, no matter how small should be defaulted. Let me explain further how paying of the smallest debts first helps.
Lets say that you had to pay $500 to meet the minimum expenditures and the full payment on the smallest debt. Lets say the smallest debt amount was $75. As soon as this debt is fully paid, you will have $75 left over to allocate to the next bigger sum. As you work your way up to larger debts, you will automatically have more money left over from the ones that you have finished paying off. Make sense does it not?