A recent emailed question

Dear Pete,

Hello! I work for XXXXX and I took one of your classes last winter at our Convention. All of your info was helpful, but I need more HELP! My debt is minimal but I have around a 550 credit score. I have two liens that add up to around $4,000 and two delinquent student loans that add up to maybe $3,000. I also have a couple credit cards that I got 4-6 years ago that add up to $600 that have never been paid off. I have heard that sometimes it is not good to pay off debt that old so I do not know what to do. I am ready to buy a house but obviously my financial situation is not. I did go to annualcreditreport.com and retrieved my full credit report, but i still do not know what to do. I just need someone to point me in the right direction. I have bad credit and nothing to show for it. I am 24 years old and I would like to start my 401K and maybe invest in some stock. I also would like to go back to school next year with some cheddar in the bank. Can you help me, please!?! – MG

Thanks for your email. Here is what you need to do (in order).

Raise money. Sell stuff on craigslist, have a garage sale, work overtime, get a part-time job. Seriously. You need extra money to pay these things off before things get out of hand. I fear that this problem could get worse if you don’t address it now. Pay off debt in the following order. Pay minimums on everything, but focus on the following debts first.

  1. Pay off credit card debt
  2. Lowest tax lien
  3. Highest tax lien
  4. Lowest student loan
  5. Highest student loan

I’m glad you emailed me. But you need to take further action. Focus on raising money, and then pay this stuff off. You shouldn’t think about moving into a house until you pay this stuff off and have a 10%  down payment. If you buy a house before then, then you will run into major financial issues in about 5-7 years. Let me know if you have anymore questions.

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