How To Prioritise What You Owe

If you have a number of bills that all need paying, then knowing which ones to pay in what order can be a bit of an art form. It can also be pretty overwhelming if you’re just starting to work it all out. How do you know which are the bills to pay as a priority, and which ones can be left if you’ve no other choice?

Putting your bills in a priority order can not only help you make a plan to keep on top of them or clear debts, it can help you to prevent consequences of debt like having your services cut off, being summoned to court, or even being evicted. And, we’re here to help you get your system sorted, so you can tackle your unpaid bills once and for all.

Shouldn’t I just pay the biggest debt first?

While starting with your biggest or most expensive bill or debt might seem logical, and may well be what you do in the end, it’s important to think about more than the size of the bill and the interest rate when you’re prioritising what you owe. Starting with something smaller could give you a confidence boost that motivates you to tackle the bigger bills on your list, for example. Or, rather than starting with the biggest or most expensive bill first, you may – and we think, should – decide to start with the bills that come with the most serious consequences of not paying.

If you don’t pay a bill, any bill, there will be consequences that play a big part in which bills you decide to prioritise. What consequences you face depend on the bill, and some are more serious than others. With some companies, you might get a lot of calls, emails, texts and even letters, and while this can be stressful to deal with, it’s all that will happen. Others might continue to charge interest after a missed payment, or charge you late fees or default fees. And with others, the consequences of not paying your bills could be more serious, and mean you eventually end up facing last resort consequences like having services like your electricity or phone cut off, fines, being taken to court, made bankrupt, losing your home or car, or in some extreme cases even being sent to prison.

So, while it might seem like the most important bill to pay off is the biggest one, or the one from the company who’s on your case 24/7 reminding you to pay, it’s important to take stock and think about all the consequences you could face . The stress of dealing with calls and emails may well need to  come second to a bill that, if left unpaid, could lead to much more serious consequences.

What about the impact to my credit score?

How your credit score is affected is one consequence of not paying your bills that most debts share. If you miss a payment towards a bill, then the company will register it as “missed” on your credit report. If you don’t get back on track, and go on to miss more payments, then these will all be logged on your credit report as well. Eventually, the company will register a default on your credit file. Having missed payments and defaults in your credit history can make it much more difficult to borrow money if you need to, because lenders look at your past record of making payments on time – or not – to decide how likely you are to pay them back. A history that includes evidence you haven’t always paid all your bills on time will result in a lower credit score, and could affect your ability to borrow money for years to come.

What counts as a priority debt?

Priority debts are those with the most serious consequences if you don’t keep up with the bills. These are the ones to try and keep up with for as long as you can, if you can. If you’re struggling to pay your priority bills, then it’s important that you get in touch with the person or organisation to let them know what’s going on and try to come to an alternative arrangement, so that they hold off on taking action to recover what you owe to them.

In no particular order, debts that are considered a priority are:

Many organisations are offering special measures for those who are struggling as a result of the coronavirus pandemic – find out more about the options available if you need them in our guide.

What is a non-priority debt?

Unsecured borrowing, like credit cards, store cards, mail order accounts and personal loans, is considered a lower priority to pay back because the consequences of not paying this type of debt are usually less severe. If you don’t keep up with the payments on your borrowing, your lender will more than likely get in touch with you, and if you don’t get back on track, can place a default on your credit file. This may be the end of it with some lenders, while others might decide to take further action, like appointing a debt collection agency to try and recover the money you owe to them, which can lead to visits by bailiffs, or starting court proceedings to file a CCJ against you.

But, in the vast majority of cases, not paying back an unsecured loan or falling behind on your credit card bill won’t result in you being evicted from your home or having essential services cut off, which is why these types of bills should only be paid once your essential, priority bills are taken care of.

How to pay off your non-priority debts more quickly

Once you’ve made sure all of your priority bills are paid or covered, then you can make a plan to pay your non-priority bills and clear any unsecured debts you have, too. As far as you can, you should make sure you’re keeping up with at least the minimum payments due to keep your accounts up to date, and then if you can afford to pay any extra, use it to take on one bill at a time.

This is where the size and interest rates of your bills come in. The bill with the highest interest rate will be the most expensive for you, so it’s a good idea to pay that one off first, even if it’s not the biggest bill you have in pounds and pence. Once that one’s cleared and done with, move onto the next, and the next, until all your bills are paid off in full. If you don’t know what the interest rates are on any of your accounts, then you should be able to find this information in your account paperwork or your online account. But if in doubt, your lenders will be able to let you know if you ask them about it.

Remember though, when you’re working out the order to pay your bills in, check if you’ll be charged any penalty fees for overpaying and potentially repaying early. Or, if you can’t afford all the payments due, check if you’ll be charged late payment or default fees for not paying your bills. Then, you can work out where they sit in your list. 

How can you prevent the consequences of not paying bills?

The most obvious way to protect yourself from any consequences of having unpaid bills is to make sure that they’re all paid, on time and in full, every month. But, sometimes it simply isn’t possible to pay every bill you have.

If you find yourself in a position where you have more bills to cover than money to pay them with, and especially if you can’t cover all of your essential, priority expenses and debts, then it’s vital that you get in touch with each of the organisations you owe money to, to explain your situation and ask for their help. In many cases, if you’re in touch with your creditors and they’ve agreed to give you some breathing space or set up an alternative payment plan, then they’re less likely to start pursuing court action or appointing bailiffs to come and recover what you owe to them.

What to do if you’re facing a debt emergency

If you’re facing a situation where consequences like disconnection or court action are becoming your reality, then it’s not too late to do something about it. If you’ve already been summoned to court, then it’s important that you turn up on the day. If you don’t, then the court can make a decision without taking your situation into account. But if you’re there, then you can explain your circumstances and this can help the court to reach a decision that works out better for you, like a repayment plan rather than a court order to pay in one go.

If you’re due in court very soon, then some courts work with organisations like Shelter or Citizens Advice and may have someone available to speak to you and give you some last minute advice before your case is heard. If this is something you need, make sure you ask about it!

At CredAbility, we’ve partnered with the Debt Advisory Centre to help put people who need their assistance in touch with them. They can speak to your creditors on your behalf, advise you on what to do next, and help you make a plan or find a solution that’ll help you pay your debts off once and for all. It’s important to bear in mind that ongoing fees may be payable for the solutions they offer, but that all-important initial advice is completely free.