How To Reduce Debt How To Pay Off Debt

by Susan
(Fairfax, VA, USA)

Ask Kate how to reduce debt and how to pay off debt: Hi Kate, Help! I pay my bills on time but divorce recovery has my middle credit score at 680. I wish to refinance my mortgage, rolling in 1st and 2nd.

Susan continues... I ALWAYS pay on time but I think my debt to allowed credit is high. I have $15K line and owe $6800. If I pay that down to $2k can I expect a few points?

I need to have some concrete action steps as my current ARM comes due in 1 year (6.35% now) and I wanted to take advantage of the great interest rates which don't seem to be available for us 680 credit score folks. Thanks, Susan

Kate Answers: How To Reduce Debt - How To Pay Off Debt

Dear Susan,

Before credit scoring was adopted by the lending world, debt ratios were still important.

But to a large degree, if bills were paid on time and debt ratios were within underwriting guidelines, the actual dollar amount of debt did not translate automatically into weak credit.

But not today. The ratio of the credit that has been used to amount of credit still available is a factor relied on heavily in credit scoring. For example, say you add up the amount of debt you owe on revolving credit such as lines of credit or credit cards. Now compare that to the amount of credit you still have available.

The more available credit you have compared to credit you owe, the more favorable.

Meet Super Kate

Well, for those who have used a good percentage of their available credit, all is not lost. But before I explain why, there is someone to I'd like to introduce. Have you met Super Kate who heads up our Successful Money Management division? I have to admit my alter ego was inspired the day she developed Super Kate's Magical 6-Step System to Paying Off Your House Faster and Easier Than You Ever Thought Possible.

The steps Super Kate has developed are reachable, do-able, and practical.

To receive Super Kate's Magical 6-Step System, sign up right now for my free newsletter, Focus on Finance. You will be walked through a series of systematic steps for reducing and getting out of debt.

Now that's magical!

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Best wishes,

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