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A good credit score isn’t the happily-ever-after it’s been made out to be. No doubt, it’s a key player in the story of your financial life. It gets you a better interest rate on your car loan, and it can open doors to better deals on apartments and mortgages. It may even be a blessing in the job hunt, because employers are increasingly looking at credit scores.
But for nearly 40 percent of creditworthy Americans — those with scores in the 660-plus range — that pretty score is just lipstick on a pile of credit card debt, according to a survey from Marcus by Goldman Sachs.
The number of consumers in good credit standing but with growing credit card debt is on the rise, according to the online survey of 1,000 Americans with those solid scores.
This is harsh news in a world where so many are in pursuit of perfection when it comes to their FICO score, a three-digit number intended to rate a person’s credit worthiness.
The average American’s credit score is at an all-time high of 700, according to the Wall Street Journal. And for those not satisfied with average, Bloomberg reports just under 3 million, or 1.4 percent, of the people with FICO scores have figured out ways to game the system and now boast a perfect score: 850.
A number, however, does not protect its owner from life’s little — or big — disasters.
Those surveyed pointed to medical expenses (64 percent) or injury (41 percent) as factors that put them on the path to debt. But car repairs, roof repairs, and the like can also pile up, and it is no secret that Americans aren’t the best rainy day savers.
While 75 percent have some sort of emergency savings, only a third have saved enough to cover their expenses for six months should they need it.
So when something goes wrong in their lives, too many consumers with good credit get into trouble by trying to charge their way out of it.
When they can’t pay the balance off right away, they can wind up in a cycle of high-interest, variable rate credit card debt.
“There’s a surprising number of consumers with good credit and a history of responsible spending who feel immense financial pressures and are falling into credit card debt,” says Andrea Woroch, a consumer finance expert working with Marcus. “More than half of them don’t feel in control of their finances, which greatly impacts their lives and there needs to be a better understanding of options that can help them navigate their debt.”
With credit card interest rates hovering just below 17 percent, debt can grow quickly. But 77 percent of those polled in the Marcus survey hadn’t heard of alternatives to credit card debt, such as a personal or credit consolidation loan — loans with fixed rates that are significantly lower than those that come with plastic.
Debt.com offers this advice for handling emergencies without an emergency fund and this advice for getting out of credit card debt. Also check out Six things not to do when seeking credit card relief.
Published by Debt.com, LLC Mobile users may also access the AMP Version: Credit Scores Are on the Rise, But Having One Isn’t Key to Financial Bliss - AMP.