We now have identified and made a list of what debts we have. Get your list out.
1. The next step is to figure out what will give you the biggest boost. From a financial perspective, it’s smart to pay off your highest-rate bad debt first. After all, putting $500 towards a $3,000 credit card bill with an 18% interest rate will save you far more than paying off a $500 bill at 6%.\
2. And lastly consider how your debts affect your credit score.
If you have maxed out or close to maxing out your credit cards and you are thinking about buying a new car on credit, consider paying down those credit card balances to give you a better “Utilization ratio”, which means how much available credit you are using and will help you qualify for lower interest rates.