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What takes priority when making payments

Feb 24, 2013 Walt Wojciechowski

When people are experiencing financial strain, sometimes paying certain expenses has to be pushed to the backburner. That might include not indulging in luxuries like movie rental services, high cellphone data packages or a costly gym membership. However, for those under a lot of pressure, car payments, rent and utilities might suffer.

According to the North American Precis Syndicate, consumers often have a ranking system of which payments can be made late to incur the minimal amount of repercussions. The source suggested that mandatory payments such as rent and utilities accounts be paid off first, with loans coming second and frivolous buys like coffee coming in last.

This can be a good strategy for individuals who already have poor credit scores. Paying off electric, gas, cable and other accounts on time can help create a Payment Reporting Builds Credit (PRBC) score, which can be used in place of traditional scores to qualify for loans. Falling behind on required payments is never a good option, however, as long as the funds exist to maintain a zero balance.

This might be lucrative information for lenders to have. While paying utilities accounts off first and then loans can be helpful for consumers because it can boost the PRBC score, if there is not enough money for lending companies, they can suffer. With this data in mind, these businesses may want to ensure they have proper debt collection practices in place should accounts fall behind for some time.