You’re doing quite a lot to try to clean up your finances, but perhaps you need to re-prioritize? If the car loan is 17% interest, are the credit card interest rates any lower? If so, you should apply those extra amounts towards your car loan – whatever has the highest interest.

Of course you need to maintain your car. If you can keep it running for another year, I’d try using that time to pay off the car loan. You may owe $6000, but if you pay more, you’ll owe less, because you won’t owe as much interest. They will recalculate the total for you.

Since the credit report says your accounts won’t go into a positive status for at least another 5 years, I wouldn’t push quite as hard to get the credit cards paid off by next December – unless their interest rates are higher than the car loan.

I think the bit about the accounts not going into a positive status till 2013 will probably be revised as you continue to pay down the debts. And your credit rating and score will go up. The two point reduction in your credit score is from using the credit counseling service – so stupid that the score goes down for getting help repairing credit, but that 2 point reduction will remain for 2 years. But overall, expect it to be significantly better in a year.

I totally agree that you need to save yourself an emergency nestegg. Don’t let anyone try talking you into using that to pay off debts faster.

As for buying a new car, if you can keep it for another year, I’d do that. The economy is crazy right now. You obviously earn a good income, but if you were to lose that, it would be terrible to lose a new car because you couldn’t make the loan payments. Better to wait until things are more stable for both you and the economy. In a year, your outstanding debt will be lower; your rating/score will be higher. By then, you ought to be able to get a much better loan rate (don’t get the loan from the dealership; join a credit union if you can, and apply there for the car loan in a year). If you had to pay 17% interest when your credit was better, it’d be even higher now, when your score is low and your debt is high.

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