Advice on debt and credit score

Here’s a tailored plan to manage your credit card debt effectively while protecting your credit score:

Immediate Steps:

  1. Stop Using Credit Cards: Avoid adding more debt to your balances. Stick to using cash or a debit card for now.

  2. Analyze Your Budget: Identify non-essential expenses to free up more money for debt payments. Even small adjustments can help.

Repayment Strategy:

  1. Prioritize Payments (Avalanche Method):

    • Focus on paying off the card with the highest interest rate first while making minimum payments on the others.
    • Likely order: Alaska Airlines > Chase > Credit Union.

OR Snowball Method (if motivation matters more): Pay off the smallest balance first to gain momentum.

  1. Use Stocks Strategically:

    • If your stocks are not part of a long-term investment plan (e.g., retirement), selling them to pay off high-interest debt can save you money in interest over time.
    • Pay off the two cards with $3,000 balances first to reduce credit utilization. Keep the $4,000 card manageable.

  2. Request a Lower Interest Rate:

    • Call your card issuers and ask if they can temporarily lower your interest rate or waive fees due to financial hardship. Credit unions are often more accommodating.

  3. Transfer Balances:

    • If you qualify, apply for a 0% APR balance transfer credit card and transfer the higher-interest debt to it. This gives you an interest-free period (typically 12–18 months) to pay down the balance faster.
    • Be mindful of balance transfer fees (usually 3–5%).

Protecting Your Credit Score:

  1. Maintain Minimum Payments: Always make at least the minimum payments on all cards to avoid late fees and credit score damage.

  2. Keep Old Accounts Open: Do not close credit cards after paying them off. Length of credit history contributes to your score.

  3. Manage Credit Utilization: After paying down balances, aim to keep utilization below 30% of your total credit limit for optimal credit score impact.

Long-Term Plan:

  1. Boost Income:

    • Look for temporary side hustles or additional sales opportunities to increase cash flow.

  2. Emergency Fund: Once debts are paid, rebuild your savings to cover future emergencies and avoid relying on credit cards.

  3. Invest Again: Once debts are manageable, reinvest in stocks to rebuild your portfolio.

By selling your stocks and aggressively paying down the debt, you can reduce financial stress, save on interest, and maintain your good credit score. Prioritize paying down debt with a plan that matches your financial and emotional needs!