Colorado residents are turning to credit cards and personal loans at the second-highest rate in the country as they struggle to make it through the pandemic, a study from LendingTree reports.
About 42.1% of Colorado residents surveyed had borrowed money the past seven days to meet immediate expenses, according to the most recent U.S. Census Bureau Household Pulse Survey. Only the District of Columbia ranked higher with 44.9% of residents borrowing to make ends meet.
Of those who borrowed to meet living expenses in Colorado, 26.7% reported relying on credit cards, while 15.4% reported borrowing from friends and family.
Colorado’s economy was strong going into the downturn and has bounced back faster, as shown by a rapid decline in its unemployment rate. Nor have the state’s COVID-19 outbreaks been as severe as those seen in other states.
So why all the borrowing? One explanation is that Colorado consumers relied heavily on their credit cards before the recession, making them more inclined to use them when income fell short. Metro Denver residents must also deal with some of the highest housing costs outside either coast, meaning they don’t have as much to spare after covering the mortgage and rent.
“There are quite a few lower-income Colorado individuals and families that rely on credit card debts frequently to cover expenses,” said Charles Brennan, deputy director of research at the Colorado Center on Law and Policy.
The CCLP studies self-sufficiency, or the ability of households to meet basic living costs based on the income available to them. About 27% of residents didn’t make enough to cover basic costs prior to the pandemic, and one way they cover the gap is by borrowing, Brennan said.
Matt Schulz, LendingTree’s chief credit analyst, said in comments accompanying the report that added debt isn’t just a financial issue, but one that can impact mental health during what is already a stressful time.
Consumers who lack a budget should make one to better understand how much money is coming in and going out. If they are struggling to repay debt, they should reach out to their lenders to see what relief is available, such as a temporary pause in payments.
They should also visit annualcreditreport.com to track precisely how much debt they have accumulated. Once limited to one free credit report per reporting agency per year, the website now offers a free report each week through April 2021.
Pay off your cards each month if you can, and try to find ways to boost your income if you can’t, Schulz said. But either way, borrowers shouldn’t beat themselves up.
“A lot of the normal rules of personal finance go out the window during times like these. Yes, good credit is important, as is avoiding debt. However, keeping food on the table and keeping the lights on for your family is more important,” he said.
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