It's not like Randy Prade of Aurora was irresponsible with his money. His credit card debt went up after his TV repair business went under.
"We had 25 employees, and we chose to maintain their payroll much longer than we should have," said Prade. "It's a big, heavy weight when you go to sleep at night. You're worried about how you're going to be able to make ends meet."
He's far from alone. A recent Lending Tree survey ranks Colorado 7th in the country for credit card debt.
"As inflation's been a problem in recent years, people have used their credit cards as a bridge, as an extension of their income to get by," said Thomas Nitzsche, a financial educator with the nonprofit Money Management International (MMI).
Debt counselors at MMI are hearing more about people turning to high-fee debt settlement companies, which often tell consumers to go into collections.
"They will actually encourage them to default on the debt in order to achieve the settlement," said Nitzsche.
While there are legitimate debt settlement companies, the Federal Trade Commission (FTC) has issued warnings about debt relief scams taking people's money and never paying off their balances.
Prade did his research and went with credit counseling. MMI negotiated lower interest rates (averaging 7%) and a lower payment.
After 5 years, Prade paid off about $79,000 in debt and improved his credit score by about 150 points. The key, Prade said, is making a plan and sticking with it.
"The longer you wait to figure out a way to get out from under something that's killing you, the worse it is," said Prade. "So, if you've got a credit card monster hanging over your head, you have to deal with it. You can't just say, 'Next month.'"
If you are looking for ways to get out of debt, the FTC shares these tips for avoiding a debt relief scam :
- Cold calls: All those robocalls promising to settle debt are a red flag. Most companies won't make unsolicited offers.
- Upfront fees: Never pay anyone trying to charge you before they do anything to help deal with your debt. That is illegal
- Absurd promises: Anyone promising new “government programs” or little-known legal loopholes without looking at your financial information is sketchy.
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