Pay These 6 Bills First When Money Is Tight

Dan Rafter — Fri, 31 Mar 2017 08:00:16 +0000

Is your money situation a little tight this month? It happens to the best of us. What if you don't have enough money this month to pay every bill by its due date? For the time being, you might need to prioritize your payments.

This isn't the ideal solution. Far from it — paying any bill late could result in a late fee. But thanks to a bit of leeway when it comes to credit reporting, paying bills just a bit late might not hurt your all-important FICO credit score.

This makes it a bit easier to determine which bills you absolutely must pay on time, and which bills you can more easily tackle after their due dates pass.

1. Mortgage

It's important to keep the roof over your head. And not paying your mortgage payment on time can send your credit score plummeting by 100 points or more. Credit scores are important: Lenders rely on them to determine if you qualify for a loan and at what interest rate.

There is some leeway, though, with mortgage payments. First, lenders can't report your payment as late to the credit bureaus until you're at least 30 days past due. This means that paying your bill one, two, or three weeks late won't hurt your credit score.

Second, according to the U.S. Department of Housing and Urban Development, lenders usually won't start the foreclosure process until three to six months after your first missed mortgage payment.

Even though these safeguards are built in, you don't ever want to take the chance of losing your home. Make sure to pay your mortgage as soon as you can.

2. Rent

If you're renting an apartment, do everything you can to pay this bill on time. Your landlord can send you an eviction notice if you're just one day late with your rent payment. Now, actually evicting you will take time, and most landlords probably won't file a notice that quickly. But you don't want to give your landlord any excuse to start this process in motion.

3. Car payment

As with your mortgage, there is a grace period before your late car payment starts to affect your credit score. Your auto lender can't officially report your payment as late to the credit bureaus until that payment is more than 30 days past due.

However, you need to be aware that if you stop making car payments, your vehicle can be repossessed. If this happens, your credit will suffer the consequences — by up to 100 points. Auto lenders can repossess your vehicle quickly, too. In fact, in most states they have the legal right to repossess your car as soon as you miss a single payment. It's unlikely that your lender will move to take your car that quickly, but why take that risk? If you're prioritizing your bills, this is definitely one to move to the top of your list.

4. Utility bills

Typically, you'll receive plenty of advance warning before your utility providers shut off your services. But you will have to pay these bills eventually to keep them on. Put these bills at the top of your priorities list.

If you are struggling to pay these bills, don't ignore them; call the utility company. Utilities will often work with homeowners who are struggling financially. They might lower your bill for a period of time or defer your payments for a few months to allow you to rebuild your finances.

5. Student loans

Student loan debt is a financial burden for many, but you might be able to work out a new repayment plan with your lender if you are struggling. This is usually easier to do with federal student loans. You might qualify for a deferment, depending on your financial situation. But even if you are struggling to pay private student loans, call your lender. The company issuing your loans might be willing to work with you to keep you from falling into default. (See also: 8 Surprising Ways to Pay Off Your Student Loans)

6. Credit cards

Yes, your credit card issuer can hit you with a late fee if you miss a payment. And yes, your card's interest rate might then soar. But credit cards don't need to be at the very top of your priorities list if you are struggling with critical bills like your mortgage.

Your credit card provider can't throw you in jail if you miss payments, and it can't take your house or car. So paying this provider after making your mortgage and car payments is OK in a financial pinch.

It typically isn't a smart move to pay only the monthly minimum on a credit card, because it's often such a small amount. However, if you're really struggling with money, this is another temporary option you can take. This will keep you current on your bill, and you can always boost your payments back up again once you've regained financial footing. (See also: 5 Simple Ways to Never Make a Late Credit Card Payment)

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This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Know If Trading In Your Car Makes Financial Sense

Christa Avampato — Thu, 26 Feb 2015 12:00:09 +0000

Do all of those car commercials on television have you thinking about trading in your car for a bright, shiny new ride? Follow the steps below to decide it makes more financial sense to buy a new vehicle, or keep and repair your current one. (See also: How Much Should You Spend on a New Car?)

1. Take a Long, Hard Look at the Car You Already Have

A new car always looks tantalizing. If we start focusing too much on the prospect of a new car, though, all of a sudden we start noticing every minor thing that may be wrong with our current car. My former boss, Bob G., always used to say, "I never like to invest in things that rust." A car, outside of a classic car, is not an investment. It's an expense, and a pricey one at that.

So look at your existing car honestly. Does it run well? Is it reliable? Does it match the needs you have right now? If you answered yes to these questions, delay your purchase of a new vehicle.

2. Calculate the Total New and Existing Costs

Buying a new car is only part of the expense. Do a side-by-side comparison of the total cost of a new car compared to your current vehicle.

Include the purchase price (plus interest), as well as the cost of maintenance and repair.

In some states like Virginia, you pay a specific tax every year based upon the blue book value of your car, so make sure to include those types of costs as well. You might be surprised to see that sticking with your existing car for a few more years, and socking away all that extra money you would have spent on a new car now, is a wise financial move.

3. Check With Your Financial Institutions

Just as you get pre-qualified for a mortgage, it's also a great idea to get pre-qualified for a car loan. You'll find out the total amount you'll be approved to spend, as well as the interest rate on the amount borrowed. You may find that there are actions you can take over the next year to improve your credit that will reduce your rate, and perhaps increase the amount you are approved to borrow. These actions could include paying down other debts, increasing your income, or clearing up any mistakes that may currently be on your credit report.

4. Time Your Purchase

In general, October, November, and December are the best times to buy a car because dealers offer a number of incentives to make way for the next year's models and hit annual sales goals. Also, it's best to shop at the end of the month because dealerships need to hit certain sales quotas by then, so they're more likely to cut you a deal to make the sale.

5. Do Your Research

If you're thinking about getting a new car, do your research. Read reviews of vehicles, check safety ratings and gas mileage, talk to friends, and test drive vehicles that interest you. It's also important to sit down and really think about what you want in a vehicle. What are your non-negotiables and what is the ranked list of your preferences such as safety, size, gas mileage, features, and design?

A new car is an incredible feeling. I know because I just bought one the last week of October 2014. I'm glad I did my research, closely examined my finances, and timed my purchase well. I never had a shred of buyer's remorse. Follow this checklist and you'll make a choice that feels good — and is good for your finances, too.

Are you ready to replace your heap? What steps are you taking?

This article is from Christa Avampato of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: