Financial Advice Q&A

Occasional Visitor
Posts: 1
Question
Should I pay off all my debt at once?
[ Edited ]

I am currently deployed and I am in the right position to pay off all my credit and school loans. My credit score is low from bad decisions. Is it better to just pay everything off in a whole are in some pieces to raise my credit score?

Other Answers: 1
Community Manager
Posts: 173

First off, thanks for your service to our country.  As you're experiencing, a deployment can be a real opportunity to clean up your finances.  Reduced expenses (taxes, etc.) and increased income (extra allowances) may allow you to pay off debt, build savings and invest for the future. In your case, the first order of business is to build a small emergency fund and then pay off all the debt.

 

While I recommend that you ultimately build up the equivalent of three to six months worth of regular expenses in your emergency fund, as a start consider socking away $1,000 in a savings account and then shift your focus to paying off the debts you mentioned.  Once the debt is gone, you can look to build up savings and start investing.

 

I don't see an advantage in taking a piecemeal approach--just get rid of the debt. As you'll see in this article from the folks that created the credit score, the two most important factors in your score are your payment history and what you owe.  By getting rid of your debt is short order, you'll be heading in the right direction.

 

I'm excited for you and your fresh financial start. Once the debt is behind you and you're ready to look at saving and investing, give one of our advisors a call at 800-771-9960. Good luck!

 

JJ

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