What do we do?: Sell car to pay of debt, increase scores?

Lawrence M Law — Fri, 15 Jan 2010 16:00:44 +0000

Lawrence,
Russ and I had a question that we were wondering if you could answer. We have $8500.00 in credit card debt. I think our interest rate is around 8%. We have two trucks that we could sell and pay off the card. We are wondering though if it would be smarter to do that and buy another vehicle that we’d have to get a loan for or keep one of the trucks and just pay down the card when we have extra money?

Thanks!
Mindy

Hi Mindy,

Thanks for the question!

It sounds like you only need one vehicle and not two. If this is the case, then selling one and paying off your credit cards looks to be the best scenario for paying off debt, and increasing your credit scores at the same time.

Points to consider:

If you sell both vehicles but then have to get a loan on a new truck, your scores will drop because of the new account. Your scores are hit 7 different ways with a new account.
Yes, debt to credit limit rations will definitely be helped by paying down credit cards. I would make sure to pay all cards that are over 45% debt to credit limit ratio; then pay them down further as you have more money to put toward them; this will also help increase your credit scores.
The best recommendation is to sell the most expensive vehicle and put that money toward bills. As you pay off your bills, save for a new truck, and then purchase it with the available cash that you have saved. You have eliminated debt and increased your credit scores at the same time.

Hope this helps.
Lawrence M law

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What do we do?: Sell car to pay of debt, increase scores?