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Credit debt is up, but so are credit scores

Residents of Massachusetts who have higher credit card debt than they did a year ago might take some comfort in knowing that they are not alone. Americans have more credit card debt now than they did a year ago, according to an Experian annual study, and the Federal Reserve reports that in 2017, the country reached a record high of more than $1 trillion in credit card debt. But the good news is that credit scores are up, too, which suggests that Americans are doing a pretty good job of handling their debts.

The average American has credit card debt of $6,375, which is up 3 percent from last year. But credit scores, which are based on credit history, are averaging 675 on the range of 350-850. That's the highest the average American credit score has been in the decade since the 2008 recession.

Experts say that good credit card management means making payments on time and not overspending. Carrying a balance from month to month means the cardholder is charged interest. As of mid-2017, almost half of Americans had been carrying a credit card balance for more than two years. The average balance is $16,883. The average interest paid yearly is $1,292.

There are two methods experts suggest for paying down credit card debt. The avalanche method targets interest from the top down and involves paying down the credit card with the highest interest rate first and making minimum payments on others until the highest is paid off. The snowball method involves tackling the lowest balance first. The theory is that this can help someone gain momentum by paying off a small debt quickly and then continuing upward towards higher balances.

When someone looks at his or her credit card debt and income and realizes that he or she simply cannot afford to make payments, bankruptcy could be a solution. A bankruptcy filing offers immediate relief from collection efforts by legally putting a stop to them. When someone files bankruptcy, collection calls, wage garnishment and all other attempts to collect money are halted.

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