States where people struggle the most with debts – 24/7 Wall St.
Although the COVID-19 pandemic has financially disrupted many households, sometimes adding to the debt burden, the share of people with debts in collection has improved very slightly and in October 2020 stood at around 29% of people with a credit history, according to the Urban Institute, a nonprofit research organization.
Having a debt in collection usually means that after a late payment, such as with a car loan or credit card bill, the debt has been sent to a third party – a collection agency – who will aggressively attempt to collect it. Having a debt in collection, it goes without saying, can be very stressful.
Across states, the share of people with debts in collection ranges from 14.39% to 41.61%, depending on the state. States with higher poverty rates and lower incomes tend to have a higher proportion of people with debts in collection. The median amount of debt in collection ranges from about $ 1,300 to over $ 2,500.
Having a debt in collection affects a person’s credit rating, which in turn can affect the availability of credit, a key part of a family’s financial health. A strong credit rating provides access to long-term loans to purchase important items, such as houses, automobiles, and household furnishings, and to pay school fees or manage medical bills.
Lack of good credit, on the other hand, can fuel a cycle of poverty, not only crippling a family’s chances of homeownership and college education for offspring, but draining resources. already limited when a loan is required. A bad credit rating reduces a borrower’s options for “payday loans” and other short-term, high-interest debt. (These are the states where people struggle with the most debt.)
It’s no surprise that average credit health varies by location. In the United States, the average credit score is 704, and credit scores range from an average of 654 in Mississippi to 738 in Minnesota, with the lowest scores found in states with the highest poverty rates. students. (These are the cities with the highest poverty rates in the country.)
To identify the share of people in each state who have debts in collection, 24/7 Wall St. examined data from the Urban Institute report. “Credit health during the COVID-19 pandemic”, and ranked each state according to the share of people with a credit history with debt in collection as of October 2020, the latest available. Debt collection refers to unpaid bills, fees, credit card debts, and payments referred to collection agencies.
Click here to see the states where most people struggle with debt collection
Additional data from the Urban Institute includes median debt in collections and median credit score by state. The Urban Institute’s dataset contains information derived from anonymized consumer-level records from a major nationwide credit bureau, covering the period February through October 2020. 24/7 Wall St. added the 2019 poverty rate, the uninsured rate and the median household. earnings from the 2019 American Community Survey from the US Census Bureau.