Drowning in debt? Too much month left at the end of the money? You can leverage grace periods and prioritize bills so you can stretch your money without hurting your credit score and really start to see your credit card balances drop.

Any action to get out of debt should begin with a plan. You can strategize in one of two ways:

  1. The snowball method, which eliminates smaller debts first and then moves on to the larger balances;
  2. The numbers method, where you pay off your higher interest cards first.

Ideally, you can start eliminating debt by consolidating your debt into just a few credit cards, and then pay off the lowest balance and highest interest card first.

Restructuring your debt doesn’t always work out that way, though. Additionally, there is some debt you may not be able to roll over onto credit cards, and you shouldn’t want to! For instance, if you have an installment loan for your car, this is good for your credit score, because it adds to your “diversity of credit.”

Tip: If you have a perfectly good car that is paid for, it doesn’t mean you should buy or lease a new car just to diversify your credit. But if you are in a situation of needing a car loan, after a few months of on-time payments, it will give your credit score a boost.

Similarly, your mortgage is a bill you’ll just have to pay every month, in most cases. But which bill should you pay first if you’re in a position where you need to prioritize? Believe it or not, it may not be your mortgage!

Credit Cards

Your credit card debt is most likely your highest interest, least forgiving, debt. That is, if you miss a payment by 30 days, you’re getting a black mark on your credit score that may not go away for 10 years.

While some experts advise paying your secured loans first and leaving credit card debt for last, this only applies if you are habitually 60 to 90 days late on your bills. After 90 days, you could face re-possession of your vehicle, or potential foreclosure on your home. If you have a choice of paying a bill on-time or 30 days late, though, you’ll want to delay the lower interest payment.

In terms of which credit card to pay first, check the grace periods by reading the fine print. Some cards have a grace period of 21 to 25 days. If you pay your balance in full within the grade period, you won’t be charged interest.

Additionally, credit cards have different policies as to when they charge late fees. For some, there is a five-day grace period, on others, if you are a day or an hour late, you’ll get charged a late fee. If it is a first offense within the past six to 12 months, you can typically have late fees waived. If you have money coming in at different times of the month, and are forced to make one slightly late credit card payment, you can read the fine print to find out the policy.

Paying a credit card bill late, however, can also impact your credit score. Fortunately, one late payment of less than 30 days is unlikely to be reported to creditors, but if you show a pattern of late payments, your debtor may begin reporting these. Try not to pay the same credit card late two months in a row.

Secured Loans

Knowing the ramifications of not paying a secured loan on time, the mortgage was always the first bill I paid, to the point of paying it two weeks early when I could! Then I read the fine print and realized that there is a grace period of up to 15 days. I still pay my mortgage on time, but if credit card bills are due, it’s nice to know the mortgage can wait a few days with no ramifications.

Other Bills

If you read your credit report, you’ll notice that many bills you pay on time, month in, month out, are never reported to the credit reporting bureaus. This may (or may not) include utility bills and rent. If you must make a late payment due to a lack of funds, these are the bills to postpone. If it’s a first offense, you can probably get late fees waived, too but, many times, late fees are minimal, totaling 1 to 2 % of the total bill.

If you’re not sure which accounts are not reported to the credit bureaus, get a copy of all three of your credit reports from the major credit reporting agencies (TransUnion, Experian and Equifax) and read it carefully to see what’s missing.

Extreme Measures for Extreme Times

It is always a good idea to pay all your bills on time, every month. You never know when a creditor will decide you’ve made one 10-days-late payment too many and report it to the credit bureaus. Under no circumstances should you let your accounts go more than 30 days delinquent.

In difficult times, it’s nice to know many creditors will be understanding of late payments once in a while, and it’s important to understand the ramifications of choosing to pay one bill late so that you can pay another bill on time.

Need Help with Paying Off Debt?

If you repeatedly find yourself making late payments, it’s time to stop the financial juggling act and look at other options, including credit counseling. You might call and request due date changes for some of your bills so that your accounts payable coincides with your income stream, reduce your expenses, or try budgeting better throughout the month.

People sometimes go through financial rough spots due to circumstances beyond their control, but if late payments are a habit, your credit score will suffer, causing you added stress and potentially costing you thousands of dollars. There are many facets to handling credit responsibly, and knowing how to get through some tough spots when you can’t pay all your bills is just one aspect… and aspect you will hopefully never experience.

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